Going into 2018 everyone was bullish, including me. We were experiencing one of the longest bull markets ever, stocks had advanced strongly the year prior with hardly any volatility, and January didn’t disappoint with a parabolic move higher. What could go wrong?
Obviously, we all now know what could go wrong. Markets are easy to understand with the benefit of hindsight. Bull markets don’t last forever, geopolitical risk does matter and interest rates can’t stay low indefinitely.
2018 was one large consolidation period, with a steep drop in October that marked the beginning of the current bear market. Most stock indexes/sectors are going to end the year down. Here is where they stand year-to-date as of 12-27-18:
S&P 500 Index: -6.91%
NYSE Composite Index: -11.8%
Nasdaq 100 Index: -1.6%
Russell 2000 Small Cap Index: -13%
Financials (XLF): -14%
Transportation (IYT): -13%
Industrials (XLI): -15%
Technology (XLK): -3%
Healthcare (XLV): 3%
I feel pretty happy with how we performed this year given what the market gave us. I was bullish until October, at which point we were out the market before the end of the month.
I have no way of knowing how far stocks are going to fall before they bottom and a new bull market begins. Historically it takes months. The risk in the stock market is still extraordinarily high.
I believe 2019 is a huge opportunity for us. My focus now is watching market technicals and attempting to buy back in at much lower prices, when the risk/reward relationship is skewed back in our favor.
We are currently invested in Government Bond ETF’s and I will be looking to add to those positions if the trend in bond prices remains up. In addition, I believe Gold is a buy and I am waiting for a good entry point.
On A Personal Note
As I mentioned in previous emails, we moved to Lafayette, Louisiana to be closer to family July of 2017. After living in California for over 30 years, it has been quite the adjustment acclimating to the south. However, being close to our family has made it one of the best decisions that we have ever made.
We had family over to our house for Christmas which was awesome. Below are some of the pictures we took of the family.
I hope everyone is having a wonderful holiday. I sincerely love working for each and every one of you!
Craig Thompson, ChFC
Asset Solutions Advisory Services, Inc. is a Fee-Only Registered Investment Advisor specializing in helping the needs of retirees, those nearing retirement, and other investors with similar investment goals.
We are an “active” money manager that looks to generate steady long-term returns, while protecting clients from large losses during major market corrections.
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