Review & Outlook

Fourth Quarter 2018


Executive Summary

January 11, 2019

John Augustine, CFA, Chief Investment Officer

Markets End 2018 Waiting for Policy Errors in 2019

It was a tumultuous quarter for investors. Stocks on the S&P 500 saw their worst quarterly performance since 2011, while bond yields fell to levels from earlier in the year.

In the end, 2018 was the worst year for global stocks since 2008—and a year when no asset group we track in the chart above produced any meaningful return to investors. Markets ended last year waiting for trade, fiscal or monetary policy errors in 2019.

In the fourth quarter, markets disconnected from the economy. Our economist, George Mokrzan, notes in the next section that, outside of housing moving from a seller’s market to one more balanced between sellers and buyers, the U.S. economy is doing fine. When the GDP numbers are tabulated in the first quarter, 2018 may have been the best performance of the U.S. economy since the Great Recession.

The stock market, though, would have none of the economic or profit-growth success. It lost confidence in global policymakers during the fourth quarter, from the U.S. to the U.K. to France, Italy and China. Now it will be up to those policymakers to instill confidence back into markets in 2019 or risk a recession in their economies.

Read full report (pdf)

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