Market & Economic Environment: December capped the worst year for global equities since 2008, as the S&P 500 and Dow Jones Industrial Average plunged 9.2% and 8.7% respectively for their biggest declines in that month since 1931. With November’s gains only providing a temporary respite from the broad selloff that commenced in October, most major global indices endured double-digit tumbles in the fourth quarter. The TSX finished the year down 11.64%, ranking it 68th among 93 indices worldwide and leaving it little changed from its levels at the beginning of 2015. Nine of the TSX’s 11 sectors finished in the red for the year, with the energy, consumer discretionary, health care, utilities and financials groups among the biggest decliners; the only TSX sectors to advance in 2018 were information technology (+12.5%) and consumer staples (+0.6%). U.S. indices also finished the year lower despite reaching record highs in the second half, with the S&P 500 -6.24%, DJIA -5.63% and Nasdaq Composite -3.88% in 2018. Most European bourses also recorded double-digit drops in 2018. Among major emerging markets, China was the worst performer in 2018 as the Shanghai Composite plunged 24.59%, while India and Brazil had positive performances with gains of 5.91% and 15.03% respectively. (Data Source: FactSet)
Our Strategy: The fourth quarter of 2018 has been one of the most volatile and challenging periods over the past decade, as the removal of major overhangs such as the NAFTA renegotiation and U.S. mid-term elections failed to reignite investors’ risk appetites due to the large number of issues that continue to weigh down sentiment. These concerns include – an escalating trade war between the U.S. and China, rising interest rates in the U.S., peak corporate earnings, geopolitical turmoil (U.S. government shutdown, Brexit, Saudi Arabia) and slowing global economic growth. The Portfolio Management Team (PMT) is adopting a cautious approach with regard to managing client portfolios, based on its expectation that 2019 will be another volatile year for financial markets. Given that the global economy may be in the final stages of its decade-long expansion, the PMT expects to maintain a defensive tilt to client portfolios going forward.
Please contact any member of the PMT if you have any questions or concerns regarding your accounts.
