January 24, 2019
Happy New Year! We are excited for the opportunity to continue to share this journey with you as we move into 2019. It is our hope that you were able to catch a breath as 2018 came to and end, bringing with it the conclusion of the worst performing year for the S&P 500 since 2008. Predicting what is to come for markets in 2019 is an exercise in futility, as things can change quickly. We’ve seen that over the course of the past 12 months! As the new year begins, we see signs of growth in our economy that lead us to hold a positive view of things, despite the ups and downs of 2018.
BUT FIRST, SOME PERSPECTIVE
If you asked us to choose a word that we heard more often than others last year, that word would be, “volatility.” It’s not unwarranted. The Dow Jones Industrial Average suffered the four largest one-day point drops in history in 2018, two of which came within a week’s time of each other! Days like these make for headlines in the newspaper, on TV, and across various forms of social media, leading to concern, uncertainty, and fear. Rarely is it mentioned on days like these, where the drops in value rank in terms of their percentage in Dow history. If that were the case, it would be quickly realized that not one of the drops sustained in 2018 ranked in even the top 20 of largest one-day percentage drops in the Dow’s history. Still, it doesn’t make these easy to stomach.
We should note at the same time, while drops in the Dow made news, there were days of significant gain as well – four of the largest ten one-day gains in Dow history happened in 2018. And just a short time into 2019, the Dow sustained it’s fourth-largest one-day gain in history. However, in terms of percentages, none of these gains crack the top 20 either. Proper perspective can shed light on days like these!
YES, BUT WHAT ABOUT NOW?
Markets don’t like uncertainty, and of that there is plenty. Rising interest rates halted gains in 2018. A trade war with China led to concerns over rising costs for goods and slower growth for many companies that do significant business with China. Many corporations restated forecasts, leading to significant drops in share price. The government ended 2018 and began 2019 in a shutdown. Concerns exist that the global economy is slowing. If you look hard enough, uncertainty abounds.
Yet none of these appear to be events that have led us to the brink of another recession, nor do we view them as reasons to make significant changes to investment holdings or strategies. The S&P 500 is valued below it’s historical earnings average (a good sign), and while trade wars are rarely healthy for any economy, strong incentives exist for both the US and Chinese governments to reach an agreement on trade sooner rather than later.
Long story short – the US economy is by no means perfect and faces its fair share of challenges. It is a reasonable expectation that larger-than-normal one-day point swings will continue. At the same time, we see value and opportunities within the markets, especially in companies that have shown a history of increasing their dividends. We believe maintaining a long-term investment strategy is the most prudent course of action as we begin the new year.
As parents of young kids we’ve quickly learned that changes happen instantly, temper tantrums are inevitable, and kids run too fast and fall often. These moments are stressful, and even painful. Yet they’re an essential part of life and part of the growth process. The analogy’s simple, but true – markets aren’t that different from a growing 2-year old!
POINTS OF INTEREST
Brighton Securities is entering its 50th year of existence in 2019 – we’re thankful to be able to share this journey with you.
Stock Market Holidays: Markets will be closed in observance of the following holidays in the coming months.
Martin Luther King Day – Monday, January 21st
Presidents Day – Monday, February 18th
As a reminder, if you would like to make a request to have funds sent to you from an investment account, please call to make this request. For security purposes we cannot issue funds via e-mail, only through speaking in person or on the phone.
Tax documents, including forms 1099-DIV and 1099-INT are scheduled to be mailed to you (or made available online) by the IRS Mailing Deadline of February 15, 2019.