The 2018 stock market was a wild ride. It began with the best-performing January in 29 years, the longest stretch without a 5% pullback, and the first 10% correction in years, which occurred over a three-week period. For the ensuing six months, the market worked its way to another record high in September. Then, for the first time since 1950, the market experienced another lightning-fast correction, with many more stocks declining even further.
The bond market has suffered more than stocks, however. The bond index is currently down about 2%, while stocks are slightly positive. Certain corporate and high-yield bonds are down even more, causing default and recession fears to creep into the credit markets. Both investors and politicians heavily scrutinized Federal Reserve comments and actions, as interest rates moved higher throughout the year.
What does all the volatility mean and where do we go for 2019?
Sometimes volatility means nothing, as computer-generated trading can cause temporary distortions in the market. Other times, volatility is a sign that investors are struggling to sort out various issues of concern, and there is no shortage of concerns:
- Where will interest rates go in 2019 and how is the Federal Reserve managing the money supply?
- How will additional tariffs affect US companies?
- Will the strength of the US Dollar impact corporate earnings?
- Will corporate earnings slow down or contract in 2019?
- Is global economic growth in danger of a recession?
- Can the market continue higher or have we already peaked?
In broad terms, AWM&T is positive on the economy, defensive on interest rates and selective on stocks. This viewpoint makes for an interesting investing environment that will be challenging to navigate, which is why you will want to join us for the 2019 Market Outlook webinar in January. We will share our analysis of the current environment and how we’re positioning client portfolios for the coming year. Listeners will also have the opportunity to ask general questions from our Chief Investment Officer, Arthur Lyons. Keep an eye out for an invitation to register for the webinar coming to your inbox later this month. In the meantime, you can watch past webinar at aafmaa.com/webinars.
If you’re a current AWM&T client and you have questions or concerns about your investment strategy, please reach out to your Relationship Manager to set up a time to talk about your objectives and staying on track. If you’re interested in learning more about what we do for AAFMAA Members like you, don’t hesitate to contact us as [email protected] or by phone at 910-853-6149.
We wish everyone a happy and prosperous New Year.