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2018 Q4 Vital Signs: End of an Era - 2018 in Perspective

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2018 marked the first down year for the U.S. equity market since 2008. The 2009-2017 stretch ties as the longest annual winning streak in market history. Until the fourth quarter, markets were buoyant, but political instability at home and abroad, rising interest rates, and a potential growth slowdown rattled global markets. Other than cash, all asset classes ranged between flat and down. Diversification isn’t “working” right now, yet 2018 was a good reminder of the impossibility of predicting short-term price action, and the need to plan for volatility. Over the long run, a diversified portfolio has produced solid results.

Vital Signs - 4Q18 - Shifting Winds Chart

Vital Signs 4Q18 Back to Normal

  • Out of 91 calendar years since 1928, 25 were negative.
  • 2018’s volatility was around average. It was 2017’s ultra-smooth market that was anomalous.

Vital_Signs 4Q18 Diversified Portfolio 600px

 
  • In Q4, a diversified portfolio of assets declined -8.5%, led by U.S. stocks. The S&P 500 and Russell 2000 Indexes declined -13.5% and -20.2%, respectively. For the year, those markets declined -4.4% and -11.0%.
  • Value stock losses outpaced growth stock losses across the market cap spectrum in 2018. The energy, financials, and industrials sectors posted double digit losses; consumer and technology stocks were about flat during the year.
  • Bonds did not provide much shelter from the storm, nor did REITs or commodities.

Vital Signs 4Q18 - Annual Returns Chart

Past performance is not indicative of future results.
1Source: Virtus Performance Analytics.
2Ned Davis Research. © 2019 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All rights reserved. See NDR disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo.
3Source: Virtus Performance Analytics. See following page for composition and definitions.