February 1, 2019 | macro-economic research report

Research Report: Worst December Since 1931

BY: Richard Croft
December 31st marked the end of a disappointing year for most investors, with nearly all assets except for cash and government bonds booking losses. Despite a strong recovery from the sell-off experienced earlier in the year, the S&P 500 gave it all back and then some in the month of December. The index declined -10.24% from top to bottom for the worst December since 1931, and closed 2018 down -6.24% in the red for the year for the first time since 2008.

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December 31st marked the end of a disappointing year for most investors, with nearly all assets except for cash and government bonds booking losses.
Despite a strong recovery from the sell-off experienced earlier in the year, the S&P 500 gave it all back and then some in the month of December. The index declined -10.24% from top to bottom for the worst December since 1931, and closed 2018 down -6.24% in the red for the year for the first time since 2008.

Like its U.S. counterpart, the main Canadian stock market index, the S&P/TSX Total Return Composite (TSX TR), also put in its worst year since 2008. The Canadian index ended 2018 down -8.89%, with much of the decline attributed to the energy and consumer discretionary sectors. That said, the TSX showed similar declines in both 2011 (-8.65%) and 2015 (-8.32%) and has shown little growth overall for the past five years.

Oil was down -25.30% on increased supply, a decline in emerging market growth prospects and OPEC’s inability to coordinate supply cuts, but it has found some support as of the beginning of 2019.

Despite being down for the year and little changed over the past five, gold came back strongly into the end of the year, reclaiming its traditional role as a safe haven against stock market risk.

In summary, 2018 ended in uncertainty, with concerns for global economic growth prospects, monetary policy decisions and corporate valuations all weighing on investor sentiment. So far, without any clear guidance, it looks like financial markets continue to drag these anchors into the New Year.

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