- FOR THE YEAR – The S&P 500 lost 4.4% (total return) during 2018, breaking a streak of 9 consecutive “up” years for the $22.1 trillion index that was created in 1957. The raw index fell 6.2% but after factoring in the impact of reinvested dividends, the overall decline was reduced by 1.8 percentage points. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).
- LONG-TERM – The S&P 500 has gained an average of +9.8% per year (total return) over the last 50 years (i.e., 1969-2018). The index was down in 2018 but has been positive in 14 of the last 16 years. Over the long-term, the S&P 500 has been up during 39 of the last 50 years, i.e., 78% of the time (source: BTN Research).
- UP vs. DOWN – The split between “up” and “down” trading days for the S&P 500 over the last 50 years (i.e., 1969-2018, encompassing a total of 12,611 trading days) is 53% “up” and 47% “down.” The split during calendar year 2018 (there were 251 trading days last year) was also 53/47 (source: BTN Research).
- INSIDE THE INDEX – Just 23 of the individual stocks in the S&P 500 gained at least +30% in 2018. 332 stocks finished the year with a stock price lower than where it started the year (source: BTN Research).
- MISSING THE BEST – The total return for the S&P 500 over the last 10 years (2009-2018) was a gain of +13.1% per year (total return). If you missed the 10 best percentage gain days over the last 10 years (i.e., 10 days in total, not 10 days per year), the +13.1% annual gain falls to a +7.9%annual gain (source: BTN Research).
- AVOID THE WORST – The total return for the S&P 500 over the last 10 years (2009-2018) was a gain of +13.1% per year (total return). If you avoided the 10 worst percentage days over the last 10 years (i.e., 10 days in total, not 10 days per year), the +13.1% annual gain rises to a +18.9% annual gain (source: BTN Research).
- SMALL-CAPS – The small-cap Russell 2000 stock index lost 11.0% (total return) in 2018. The small-cap index has gained +9.0% per year over the last 35 years (1984-2018). The Russell 2000 index is an unmanaged index of small-cap securities which generally involve greater risks (source: Russell).
- FOREIGN STOCKS – The international stock index EAFE lost 13.8% (total return) in 2018. The foreign stock index has gained +8.2% per year over the last 35 years (1984-2018). The EAFE index is an unmanaged index that is generally considered representative of the international stock market. These international securities involve additional risks including currency fluctuations, differing financial accounting standards and possible political and economic volatility (source: BTN Research).
- BROAD-BASED BOND INDEX – The taxable bond market was up a miniscule +0.01% in 2018 (total return) but has gained +5.1% per year (total return) over the last 25 years (1994-2018). The Bloomberg Barclays US Aggregate Bond Index (created in 1986), calculated using publicly traded investment grade government bonds, corporate bonds and mortgage-related bonds with at least 1 year until final maturity, was used as the bond measurement. The index is a major benchmark for US bond investors (source: Bloomberg Barclays).
- BARELY – The YTD total return for the Bloomberg Barclays US Aggregate Bond Index was negative every trading day in 2018 except for the final day of the year (12/31/18). If the index had been down for the year (it gained +0.01% for 2018) it would have been the 1st time in history that stocks (using the S&P 500) and bonds (using the Bloomberg Barclays US Aggregate Bond Index) were negative in the same calendar year (source: BTN Research).
- TEN-YEAR NOTE – The yield on the 10-year Treasury note ended 2018 at 2.68%, up 0.27 percentage points from the 2.41% it finished at on 12/31/17. The 10-year note yield was 2.57% on 8/05/11, the day that the rating agency S&P downgraded the USA from a top-rating that our nation had held for 70 years (source: Treasury Department).
- HOUSING – The average interest rate nationwide on a 30-year fixed rate mortgage was 4.55% at the end of 2018. The record low national average was 3.31% as of 11/22/12 or just over 6 years ago (source: Freddie Mac).
- BAILOUT NOT NEEDED – No US bank failed in 2018, the first calendar year to achieve that result since 2006 (source: Federal Deposit Insurance Corporation).
- OIL PRICES – The price of oil ended 2018 at $45.41 a barrel, down 24% from its 2017 close of $60.12. As of 10/03/18, oil was trading at $76.41 a barrel before falling $31 a barrel (off 41%) by year-end (source: CME Group).
- OVERSPENDING – The national debt of the United States was $21.867 trillion as of Friday 12/28/18, an increase of $11.3 trillion over the last 10 years (source: Treasury Department).
IMPORTANT DISCLOSURE: The information contained in this material has been prepared for informational purposes only and does not constitute investment advice. Any mention of particular stocks or companies does not constitute and should not be considered an investment recommendation. Past performance is not a guarantee of future results. Any forward-looking statements presented in this material are inherently uncertain and cannot be relied upon as statements of actual performance.
Reproduction Prohibited without Express Permission – Copyright © 2018 Michael A. Higley. All rights reserved.
