Here’s how ugly 2018 was for stocks and other assets

Investors ‘likely experienced declines in annual returns’

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A little post-Christmas love from Santa Claus to end 2018 won’t be enough to turn the tide for an ugly December and a brutal 2018 that cut across a broad swath of Wall Street, ranging from stocks to commodities.

Indeed, while investors had spent much of the long-running bull market in stocks arguing that “there was no alternative” to equities, the past year saw investors lament that there was “nowhere to hide” as asset classes across the board came under pressure.

The table below from CFRA, using data through Friday’s close, offers an illustration:


No matter the investment, “investors likely experienced declines in annual returns. Indeed, even though U.S. REITs and the dollar recorded total returns in excess of 4.5%, declines were seen in bonds, gold, oil, preferred stocks and U.S. equities, along with developed international and emerging market indices,” said Sam Stovall, chief investment strategist at CFRA, in a Monday note.


U.S. stocks moved to the upside on Monday, building on a rebound that saw major indexes on Friday post their first weekly rises of the month. But the S&P 500 SPX, -0.26%  and Dow Jones Industrial Average DJIA, -0.32%  still logged their worst monthly declines since February 2009 and their worst December performances since 1931, while the Nasdaq Composite COMP, -0.44%   which fell into bear-market territory earlier this month, saw its worst December since 2002.

For the year, the S&P 500 fell 6.2%, the Dow dropped 5.6% and the Nasdaq Composite shed 3.9%, marking the worst annual performance for all three since 2008.

For a detailed breakdown of 2018 U.S. stock market performance, check out: Dow industrials and S&P 500: The best- and worst-performing stocks of 2018

Major equity markets outside the U.S. largely suffered even more. China’s Shanghai Composite SHCOMP, +0.74%  fell 24.6% in 2018, the biggest annual fall since 2008, while Hong Kong’s Hang Seng Index HSI, +0.55%  shed 13.6% for its biggest fall since 2011, according to data compiled by Dow Jones Market Data.

Japan’s Nikkei 225 Index NIK, +0.97%  fell 12.1%, for its biggest fall since 2008.

In Europe, the Stoxx 600 SXXP, +0.09%  fell 13.2% for 2018, its biggest decline since 2008.

Emerging-market stocks were punished in part by a stronger dollar, with the iShares MSCI Emerging Markets ETF EEM, -0.56%  falling over 17%, its worst performance since 2015, according to FactSet.

As noted, a down year for stocks was uncharacteristically also a down year for bonds. The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -1.93%  rose 27.6 basis points, its largest annual rise since 2013. Yields and debt prices move in opposite directions. The iShares Core U.S. Aggregate Bond ETF AGG, +0.12%  fell 2.6%, its biggest decline since 2013.

On the commodity front, gold futures GCG9, +0.17%  ended the year on a strong note but were still poised to log a nearly 2% annual loss, based on the most-active contract. Crude futures tumbled sharply in the fourth quarter, slumping into a bear market after hitting nearly four-year highs in early October. The U.S. benchmark, West Texas Intermediate crude CLG9, -1.56%  , was down around 40% from its high and saw a 2018 fall of 24.8%, the largest annual drop since 2015.

As for the dollar, the ICE U.S. Dollar Index DXY, +0.08% which tracks the currency against a basket of six major rivals, fell 1.2% in December, trimming its 2018 gain to 4.3%, still its strongest rise since 2015.

Looking at stocks, Stovall said investors might take comfort from a look at the gap in performance between the sectors of the S&P Composite 1500 Index, which is made of up of the large-cap S&P 500, MidCap 400 and SmallCap 600.

Through Friday, the gap between the return for the top-performing sector, health care (up 5%) and the worst-performing sector, energy (down 18.5%), was 23.5 percentage points, well below the long-term average gap between top and bottom sectors, stretching back to 1970, of 41 percentage points.

In years following a below-average differential, the S&P 500 saw a positive full-year total return 91% of the time, he noted, versus a positive run only 60% of the time when the spread was above average.


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