The 2018 US stock market showed major changes in the fourth quarter. Volatility scared investors and some panicked. Others changed asset allocations. Suddenly, 2% on cash equivalents had resonance. In the worst single week, US stocks lost $1 trillion in market value, revisiting the lows of the year.
Reasons: The Trump Trade War, Fed uncertainty, slowing growth, the Brexit mess, White House chaos and worsening POTUS legal problems, political changes in the House of Representatives, possible impeachment in 2019, oil market price collapse, Russian aggression in Crimea and Venezuela. I will stop.
The Good News
We are using any pull back as an opportunity to add to our equity positions and expect a deeply oversold market to rebound early next year. We are overweight the healthcare sector using three different ETFs. While we do not see a recession, we do see S&P 500 earnings of $175 or so in 2019. For us, that means a 2900-3000 range is fairly priced in in an environment of low interest rates, low inflation and slow growth. Of course, this could change at any time.
We wish you a healthy and happy new year. It sure is a complex and challenging world.