The Verus Team

The Verus Team’s 2018 Predictions and Review & 2019 Expectations

Written by: The Verus Team. Any opinions are those of The Verus Team and not necessarily those of RJFS or Raymond James.

Back by popular request… Well maybe not by anyone’s request, but we do enjoy going back and reflecting on the year past, and laying out some fun 2019 predictions to handicap the year ahead.

So without further delay, here we go…

In 2018 we properly predicted:

  • Stock markets will be higher, lower, or the same in 2018

  • The recently signed Tax Plan will help US stock prices move higher, or is already priced into the market (umm sure)

  • Politics will play a part in the market’s performance, or it will not have much impact at all

  • There will be more ways for retail investors to get access to cryptocurrencies

  • Geopolitical events remain a risk

  • The New York Yankees will win the World Series (ok that was wishful thinking – and really WRONG – ugh - Red Sox…)

  • Interest rates will fluctuate

  • There will be surprises

  • Someone will have a discussion about the weather with you

  • There will be an event this year that will make you angry, happy, frustrated, entertained, and sad

  • Social Media will still exist

 

In hindsight – a helpful tool for many who like to prognosticate and opine – 2018 was an extremely volatile year in the equity and commodity markets. Across the board, thanks mostly to a very negative Q4 of 2018, the overall year showed negative returns compared to where we finished 2017.

We saw the Federal Reserve raise federal funds rates four times in 2018, and the 10 year US Treasury Yield peaked at just under 3.25% in 2018.  The US 10 year yield finished the year lower (around 2.7%), but those steady moves by the Fed, and the subsequent volatility in stock and bond prices, reminded many market pundits of the adage “Don’t Fight the FED”.. That particularly played out in Q4 of 2018.

Like we saw in early 2018, the volatility picked-up into the end of the year as well, and from the looks of things heading into 2019, volatility appears to not be going away any time soon. In addition to the FED, we continue to be inundated with news about Chinese trade talks, investigations, government shutdowns, and fears of global economic slowdown.

News is now deemed as fake or real, biased or partisan, and at the end of almost each day - exhausting. Skepticism, unfortunately, is becoming more common, and extremism appears to sell.

To some extent in 2018 – those sentiments and emotions have appeared to have impacted equity and bond price behavior too. In part, it is being reported by business pundits that trading algorithms are being created to make trading bets based on the sentiments projected from certain news stories. Really?

The end of 2018 also saw a number of hedge funds unwinding as high net worth investors realized paying high prices to money managers who are not really successfully “hedging” you, or making any money, makes little sense. They had a window at the end of 2018 to pull those funds, and we saw a good amount of hedge fund liquidations.

All of this added to a very eventful holiday season and year end – but I digress.

As we digest all of the news and variables heading into 2019, here is what we know as I write:

  1. Interest rates are currently higher on the short-end than we have seen in several years.

  2. A lot of equity prices are generally lower than where they were in October of 2018.

  3. There are always risks when investing (or not investing) your money.

  4. It is near impossible to predict short-term market moves.

  5. A plan that is crafted with the correct balance of short, intermediate, and long term funds -properly aligned with realistic goals - can typically weather most storms.

So like we predicted in 2018, we expect 2019 to be quite similar… Unpredictable.

With that however, we are completely prepared to tell you what happened in 2019 at the beginning of 2020.. You see we are usually better telling folks what happened after it happens…

In the meantime, use the turn of the calendar year as an excuse to review your plan, look at your allocations and investments, and plan for the year ahead. Markets ebb and flow and we never know when and by how much.

What we do know, is that the environment is where it is now, and it is important to check the temperature (at a minimum annually), on what you need, what you want, and how your current financial state can be maintained, tweaked, or completely changed to address your wants and needs.

There are lots of uncontrollable factors that can impact the course. Prepare, adapt, stay flexible, and move on to living a fulfilling life. The rest will happen with or without us.

Cheers, and here is to a happy and healthy 2019!