Where do we stand going into the Year Ahead?
It is always helpful to define where stand today and understand a few points about how we got here. So as a sequel to my last post, here are a handful of data points about today’s economy and market stats from the recent past. Several of these may surprise you.
Today’s Economy
Literally in the past three days we have experienced the first (of typically many) turnarounds in the market’s sentiment about the US economy. Consider:
Just three days ago on January 2nd, The Wall Street Journal reviewed 2018 and offered analyst predictions of a slowly weakening 2019. The markets sank.
Then, two days later in the first jobs report of 2019, US employers reported adding 312,000 jobs in December versus expectations of just 177,000 representing a far above-average blowout vs. expectations. This addition of jobs came amidst one of the worst months for the US stock markets in decades. Markets rose 3.5% in just one day.
- The jobs report went on to report that for the year 2018, the number of jobs added was the most (2.64 million) since 2015.
- Wage growth (the increase in what workers are paid) expanded the most for a full year since 2009.
- The number of jobs added by employers increased for the 99th month in a row, representing the longest stretch on record.
- In manufacturing the job gains were the biggest since 1997 and these gains came despite a stronger dollar (makes US goods more expensive abroad) indicating a currently strong consumer.
These monthly and yearly advances took place amidst broad-based concerns over tariffs and trade, political uncertainty and rising interest rates.
Concerns remain. Namely regarding:
- the effects of tariffs on trade and hiring
- corporate earnings growth in the coming year
- sustainability of wage gains
- political uncertainty
- (A Biggie) drug makers raising prices on hundreds of medicines as of January 1st, 2019 – over two dozen going up by more than 10% and the average drug price increase of 6.7% far out-pacing inflation.
Market Stats from Recent Past
Consider the prior five years’ US stock market starts vs. their finishes:*
2014 Start: By Feb 5th, the Dow Jones was down 7%; the S&P 500 down 5%
2014 Finish: At Dec 31st, the Dow finished up 7.5%; the S&P 500 finished up 11.4%
2015 Start: By Jan 30th, the Dow was down 3.7%; the S&P 500 down 3.1%
2015 Finish: At Dec 31st, the Dow was down 2.2%; the S&P 500 finished down 0.7%
2016 Start: By Jan 15th, the Dow was down 8.2%; the S&P 500 down 8%
2016 Finish: At Dec 31st, the Dow finished up 13.4%; the S&P 500 finished up 9.5%
2017 Start: By Jan 31st, the Dow was up 0.5%; the S&P 500 up 1.8%
2017 Finish: At Dec 31st, the Dow finished up 25.1%; the S&P 500 finished up 19.4%
2018 Start: By Feb 8th, the Dow was down 3.5%; the S&P 500 down 3.0%**
2018 Finish: At Dec 31st, the Dow finished down 5.6%; the S&P 500 finished down 6.2%
Note that where the market started rarely – if ever – indicated where it finished.
Conclusions
In my last TGIF 2 Minutes I emphasized that predictions are worthless and that discipline – and planning – are imperative to a lifetime of successful investing.
If I add any value to you and the lives of my clients, it is to ask and understand:
- What is most important to YOU?
- Family? Kids? Your job? Your business? Travel?
- What are your GOALS?
- More kids? Save more? Spend less? Know how much you spend? Expand a business? Retire?
- And literally, what are your DREAMS?
- Sail around the world? Relax more? Make a difference in the lives of your employees? …these are for you to define!
The “statistics” that come from the answers to these questions are the benchmarks for successful investing. One of my dreams is to work with you to achieve a level of peace of mind in answering these questions.
If you have anything to add to these thoughts or how to approach the “Year Ahead” please do not hesitate to call or email me. Onward!
* Source: WSJ Market Data. Data reported without reinvested dividends.
** There were 18 new all-time highs for the S&P 500 in 2018! Data estimated for S&P 500 at Feb 8th.