Stocks Continue to Struggle
Last week brought more volatility to the markets. While domestic indexes had some rallies as positive trade news emerged earlier in the week, by Friday, December 14, they had erased any gains.
For the week, the S&P 500 dropped 1.26% and the Dow lost 1.18%. International Stocks also had a 0.89% weekly loss while the U.S. Aggregate Bond Index was up a slight 0.06%.
Why did markets struggle last week?
With last week's declines, the S&P 500 was in the midst of its worst December since 2002. Concerns about global growth likely fueled some of the declines as China and Europe released economic data that missed projections. The ongoing trade tension contributed to slower growth in China, which drove some investors to worry about U.S. growth, as well. Ongoing concerns about the pending results of the Mueller investigation possibly weighed on investors also.
We did, however, receive solid domestic data last week, including a healthy retail sales report. But, through the week, investors seemed less interested in this data and positive trade updates, focusing instead on understanding the global economy's standing and on current geopolitical news.
What might be ahead?
This week presents a potentially significant event for domestic markets - the Federal Reserve's commentary after its latest meeting. The Fed will likely raise interest rates during the meeting, which would be the 9th increase since December 2015. Markets expect this hike, but what investors aren't sure about is how the Fed will describe its plan for 2019. Some analysts believe that if the Fed indicates it will pause or slow rate hikes next year, that stance could provide some tailwinds for the equity markets.
For short-term traders, predicting whether 2018 will stay in negative territory or stocks will end the year on a surge is completely a guessing game. As we covered in our last client video update, what happens in the next two weeks does not matter except for tax reasons. An investor’s long term investment journey does not start and end with each calendar year. It is a multi-year, multiple business cycle experience where long term, risk-adjusted results are the ultimate measure of success.