Sarah Swan

Happy New Year, and Happy End of a Decade—and a pretty blow-out one at that. We find it both nostalgic and fruitful to look back at the past decade because it can help us refine and adjust our perspective for the year (and decade) to come.

The first quarter of 2019 was certainly easier to stomach than the one prior in which we experienced a dramatic sell-off to finish 2018. Refreshingly, the S&P 500 Index finished the first quarter up over 13%, recouping nearly all of its losses from the fourth quarter (although it hasn’t quite cut through its 2018 high of 2929.67). This was actually the market’s best start to a year since 1998—and every sector brought in positive returns. Market performance is just one piece of the puzzle, though, so we look to the economic backdrop and the behavior of monetary and political policy makers to get a true pulse on things.

And good riddance to what turned out to be a very difficult year for the markets and investors. There was essentially nowhere to hide. Of the 15 major asset classes (everything from US large caps to emerging market stocks to high yield bonds to gold), US cash equivalents was the only one to finish the year with positive returns. Likewise, the 25 largest equity ETFs were all down for the year, with almost half of the funds down double digits. Only 3 of 48 country ETFs posted positive returns for the year! And for the S&P 500 index in particular, the last quarter of 2018 was one of the ten worst fourth quarters since 1929.

Despite some occasional faltering and vulnerability this quarter, major US stock indexes are still boasting decent gains for the year. But a quick look at the Federal Reserve, the bond market, and growth prospects across the globe tell us to at least take heed as we head into the last quarter of 2018 and look ahead to next year.

In case you were able to forget, the second quarter reminded us that we are no strangers to volatility in the markets. We’ve seen the main indexes whipsaw intraweek and even intraday over the last three months, with the S&P 500 Index ultimately finishing the second quarter up 3.43% and up 2.65% year to date, making up for the first quarter’s losses. Headlines surrounding geopolitical turmoil, political agendas, central bank policy, international trade disruptions, and corporate developments, scandals, and acquisitions have driven the markets on an almost daily basis. All the while, fundamentals have remained strong and corporate earnings have continued to offer credence to a highly valued stock market, despite nervousness about the inevitable and unpredictable return of the bear.