Financial Markets Commentary 4th Quarter 2018Submitted by Capital Strategies Financial Corporation on March 27th, 2019
Stocks had a rough quarter worldwide. In fact, 2018’s poor performance has raised the question as to whether or not the post-financial crisis bull market was over. Stocks declined during the summer of 2011 and again from late summer 2015 through mid-winter 2016, but both times they rallied sharply after the low was put in. This reinforced the strategy of “buying the dip”. 2018 saw a correction in the first quarter followed again by “dip” buying which pushed the major market averages once again into record territory by the end of the third quarter. Immediately thereafter, a second sell-off began. The fourth quarter decline was deeper from top to bottom (-19.8%)i than the previous ones and the breadth (the percentage of stocks making 52-week lows) was greater as well. In other words, almost no stock was spared (especially not the large consumer technology stocks that made the most money for investors on the way up). The fact that the ten percent first quarter decline was followed up so soon with an even larger decline is not a good sign, but it is not conclusive. It does warrant additional defensiveness, we believe.