2018 saw the return of volatility to markets, culminating in a particularly grim December. As a result, many major indices have had their worst year since the global financial crisis a decade ago. The FTSE 100 index ended the year down -12.48%, while the S&P 500 index finished on -6.24%. The bearish sentiment in December came largely from fears over the US and China failing to strike a trade deal.
The Dow Jones Industrial Average (DJIA) index, which measures 30 of the largest blue-chip stocks in the US, had a particularly volatile year. Since its inception, the index has swung by more than 1,000 points just eight times in its history, and five of those were in 2018. Meanwhile the S&P 500 index was up or down more than 1% nine times in December alone – compared to eight times in the whole of 2017 - and both the DJIA and the S&P 500 index had their worst December since the Great Depression in 1931.
It wasn’t just investors who endured a difficult December; after cancelling the ‘meaningful vote’ on the UK’s withdrawal agreement from the EU due to the likelihood it would not be passed, Theresa May faced a vote of no confidence from her own MPs. Having survived with 63% of the vote, she returned to Brussels the next day in a bid to amend the withdrawal agreement, with the next meaningful vote due to take place later this month.
Here is the round-up of December market performance. In the UK, the FTSE 100 index declined -3.49%, while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index, shed -5.28% and -3.50% respectively. In the US, the S&P 500 index fell -9.03%, while in Europe the Eurostoxx 50 index conceded -5.23%. Japanese stocks measured by the Topix index plunged -10.21%.
Emerging market returns were also negative, as the MSCI Emerging Markets index slid -2.46%. Chinese equities continued to struggle as the MSCI China index dropped -6.04%, Indian stocks held up relatively well as the IISL Nifty 50 PR index dipped just -0.13%. Latin American equities, measured by the MSCI Latin America index, declined -1.17%.
The fixed income markets were more positive. UK government bonds, measured by the FTSE Gilts All Stocks index, gained +2.19% and long dated (over 15 years to maturity) gilts picked up +4.67%. In the corporate market, European corporate bonds, measured by the Markit iBoxx Euro Corporates index, rose +0.17% while sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, returned +1.11%. In the high yield market, the Bank of America Merrill Lynch Euro High Yield index and the Bank of America Merrill Lynch Sterling High Yield index relinquished -0.38% and -0.92% respectively.
In the commodities market, the S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, fell -7.75%. Oil’s slump continued as the price of a crude oil contract sank -10.84%. The precious metals on the other hand enjoyed a positive month, with the S&P GSCI Gold and Silver indices returning +4.73% and +9.53% respectively. The agricultural markets were negative though, as corn and wheat lost -0.73% and -2.42% respectively.
In the FX market, the US dollar was flat against the pound as it moved just -0.04%, while the euro gained +1.30% against the pound.
(All the above returns are reflected on a local currency basis i.e. they do not factor in any relevant currency movements. Unless accompanied by PR (Price Return), they do include income).
Issued by Courtiers Asset Management Limited, CAM0119199. Courtiers Asset Management Limited is Authorised and Regulated by the Financial Conduct Authority - Register No: 616322. Address: 18 Hart Street, Henley on Thames, Oxfordshire RG9 2AU. Telephone: 01491 578368 Fax: 01491 572294 Website: www.courtiers.co.uk.
Warning – the views expressed by Courtiers in this summary and any video and video transcripts, are reached from our own research. Courtiers cannot accept responsibility for any decisions taken as a result of reading this document, watching the featured video or reading the video transcript and investors are recommended to take independent professional advice before effecting transactions. The price of stocks, shares and funds, and the income from them, may fall as well as rise. Past performance is not necessarily a guide to future returns.
We do not endorse nor accept responsibility for the content of any website not operated by Courtiers which you may visit by following a link from this article.
Seminars & Events
Valuable live commentary on the latest investment views and news, delivered with a unique Courtiers edge.Info & Booking »