2018 was a truly newsworthy year for the markets. With record highs and lows, US stock markets ultimately marked a loss in total return for the first time since 2008, with the S&P 500 (INX) falling 4.38 percent. Political instability, global growth worries, and the Federal Reserve's rate raising program captured and enthralled investors. As a new year begins, highlights of the world's markets can offer insights for the future.
The US stock markets began 2018 with a blast thanks to the Republican tax reform law. Then it experienced an unexpected bout of volatility in February, falling to a new low before bouncing back into the summer. The summer rally was undercut by Trump trade wars with China. Concerns about Chinese growth and the Federal Reserve's rate hikes were also stumbling blocks. Still, the markets entered autumn with fresh confidence, and the S&P 500 notched its record high of 2,940.91 on September 21. Volatility returned in the winter, as a potential US-China trade deal failed and Trump began to publicly attack the Federal Reserve for its continued rate hikes. A government shutdown exacerbated the bear market, though stocks managed to escape into just a correction in the last week. Tech, energy, and manufacturing struggled especially, while utilities and consumer staples endured better. The worst performing stocks were Coty, Inc. (NYSE: COTY), down 67.3%, Mohawk Industries (NYSE: MHK), down 57.2%, and General Electric (NYSE: GE), down 57.1%. The best performers were AMD (NASDAQ: AMD), up 79.8%, Keurig Dr. Pepper (NYSE: KDP), up 61.6%, and Advance Auto Parts (NYSE: AAP), up 56.5%.
Global stock markets also made moves in 2018. With China making up such a large part of emerging markets, some investors looked elsewhere for outsized returns. China was one of the worst performers, as the Shanghai Composite fell 28.64%. Venezuela, Argentina, and Turkey fared worse, falling 94.89%, 50.2%, and 43.35%, respectively. Ukraine topped the list at a whopping 80.39% return, followed by Macedonia at 30.41% and Qatar at 20.87%. Funds and individuals who discovered these diamonds in the rough are happy with their diversification.
Cryptocurrency was the worst performing market of 2018, collapsing some 85% in the last year, thanks to hacks, crowdsale regulations, and a major fork. Bitcoin (BTC) fell by 75%, and Ethereum (ETH) by 84%. The best performers were exchange tokens Huobi Token (HT) and Binance Coin (BNB), down 26.32% and 27.05%. For American investors, cash was the best performing market of 2018, thanks to higher short-term interest rates and a lack of volatility. Investors could be wise to conduct due diligence on speculative assets like cryptocurrency and park some cash on the side to weather bear markets and buy at firesale prices.
The author owns a small long position in the S&P 500 (INX) and a small amount of BTC.