Monday – December 31, 2018

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Market opens in the green on this last day of 2018. It’s been a rocky one. What started out as a powerful run, with a 5% gain in January ended with the bottom falling out in early December only to try to bounce and heal as we head into the new year. There were 19 closes at all-time highs in 2018. 14 of them came in January. There was an absence of volatility in 2017. Volatility was a permanent resident in 2018. It is likely to hang around in the first half of 2019 at a minimum. We need to get used to it. But stocks are jumping on this final day. There is some optimism that progress is being made on trade as the 2 Presidents had another call over the weekend. The US is sending a delegation next week to Beijing for further talks. The oversold bounce continues. Bear Market rallies are amongst the most powerful. That’s what we think this is. We plan to sell it, but will let it run its course because it could definitely go a bit higher on this snapback. Crude prices are higher too. Oil has been slaughtered in Q4, but a nice bounce to end the year is providing fuel for the Stock Market as well. After hitting a multi-year high, the Dollar is weakening, which also helps stocks and commodities. They’re related. Interest rates are lower too as the 10-Year Treasury is going to close the year pretty much in the center of the range, which began at 2.4% and peaked at 3.25%. The 10-Year is at 2.7% on New Year’s Eve morning. The S&P is down 7% on the year, heading into this final trading day. This will be only the second decline since the Bull was born in 2009. Back-to-back decliners are rare, last occurring in 2002. So that sets up for a positive new year, but it’s certainly no guarantee and will not be a smooth ride. We are embracing more declines in H1 2019. We still have some unfinished business to attend, and will finish the year out strong as we prepare for 2019 and whatever it brings.

Have a great morning,

Mike Frazier

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