A Month and Quarter of Superlatives

Last month U.S. stocks took it on the chin with the S&P 500 (large companies) falling ~9% (while smaller U.S. companies fell harder at 11%).  It was actually the second worst December performance for the stock market ever, with the only worse December occurring during the Great Depression in 1931!  Of course, this is not at all to say that we might be replaying that awful past.  Nonetheless, there were some noteworthy market moves (or at least newsworthy, as these sharp swings mean little besides interesting headlines to the long-term investor).  To name a few:

• 2018 was the worst year since 2008 during the Great Recession.
• Every major market index ended 2018 in the red.
• After hitting new all-time highs in early October, stocks fell broadly into a bear market with virtually all U.S. stock indexes falling 20% or more from the previous highs (technically, the S&P 500 only fell 19.93% intraday but for our purposes, we will conclude that’s a bear as it sure felt that way).
• It was the worst Christmas Eve market decline ever followed by biggest up day in market history on December 26 as the Dow Industrials reversed course, gaining more than 1000 points.
• The late November rally when S&P 500 gained 4.8% during the week of November 26 was best week in seven years but was followed a few weeks later (week of December 17) by the five worst trading day period also in seven years as the S&P fell 7.1%.
• All but one of the major asset classes finished with losses for 2018 with the only exception being U.S. Aggregate Bond index which essentially broke even.  This is the first time since 1972 that at least one did not gain at least 5%. 
• Volatility exploded in 2018 soaring to levels last seen during the financial crisis in 2009.  This was a rude awakening for investors who had grown complacent following the calm market of 2017 which happened to be the least volatile year since 1964. 

I actually could go on and on.  But the gist is that we experienced long overdue volatility and long overdue selling, particularly in U.S. stocks.  I would not be surprised to see the volatility continue as the market is bouncing these past few days off the very oversold lows set in late December.  While the markets may not be calm, it is important that as investors we stay calm and don’t let our emotions run the show.  Nothing that has happened in the markets has been unexpected.  Our strategies are designed to help us navigate both up and down markets so that over time we will benefit and realize our most important long-term goals.