Merely a glitch?

A glitch is a word that has been used by the US president to describe the recent vicious sell-off in markets. For those who have lost money, there might be some other choice of words. As seen in the chart above, there really was nowhere to run to last year and nowhere to hide, with the exception of REITs and USD cash.

90% of all asset classs fell and to put it into perspective in many respects last year was the worst year since 1920 when 84% of all assert classes fell.

Horror stories

• Equity funds worldwide saw outflows of $39billion in the week to Dec. 12, the largest ever weekly outflows from stock funds
• With stocks tanking, pessimism among mom-and-pop investors hits highest in more than five years
• S. stock market exodus is second-biggest on record, BofA says
• S. stocks posting their worst December since the Great Depression
• The FTSE All-World index, which tracks thousands of stocks across a range of markets, plummeted 12% this year. It’s the index’s worst performance since the global financial crisis and a sharp reversal from a gain of nearly 25% in 2017.
• 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.

The reading is grim, and whilst we do not mean to scare you, it is important to be aware of the pervasive pessimism that is present in markets at the moment.

Although the human instinct is to become scared and sell at times like these to preserve wealth, we strongly urge you to pause and not make any hasty decisions but instead focus on the original time frame and investment strategy you have envisioned. Over time, we are convinced that last year’s event should just represent a minor blip on the charts.

Just remember that sometimes the “Only Thing We Have to Fear Is Fear Itself” (Franklin D. Roosevelt).

Wrong footed already?

In our opinion, the current situation feels very similar to 2011- just look at what happened in the two subsequent years.

In fact when looking at the latest ytd date market returns many developed markets have already produced above or close to double digit returns but investor cash levels in January are at 10 year highs.

The only conclusion one can draw is that the stockmarket must be one of the few markets in the world where participants don’t like sale prices!

Just as we had a vicious downward spiral on the way down as bad news and sentiment fed on themselves we expect a similar and opposite reaction on the way up (coiled spring) as the worst worries never materialise.

We expect 2019 to be a much better year than the majority expect it’s just a shame most won’t realise it until it is too late

Written by:
Peter Ahluwalia | Chief Investment Officer, Partner