A Long December

A long December and there’s reason to believe, maybe this year will be better than the last” ~ A Long December, lyric from the band Counting Crows

What a difference a year makes. If 2017 was the year where everything in the market worked, 2018 was anything but. In 2017, tailwinds for global markets were plentiful. US Markets welcomed a reduction in regulation, the prospect of lower future personal and corporate taxes, high employment, and rising corporate earnings due to increased consumer and business confidence. All markets benefitted from global synchronized growth. As can be deduced from the chart below, 2017 was a year where all major asset classes provided some level of positive absolute return.

Turn the page to 2018 and pessimism about the future seemed to abound. Although fundamentals of both the macro economy and companies’ operating performance remained strong, the market seemed to will itself into a recessionary mindset. By the fourth quarter, fears of slowing US and global growth, decelerating earnings growth, and concerns of peak margins put markets into a tailspin. Moreover, China trade fears, political uncertainty, end of year tax-loss selling, and a Federal Reserve walking a very thin line, all contributed to a disappointing fourth quarter and, ultimately, a disappointing year.

Asset Class Returns

There is an old saying that “Time in the market, not timing the market, builds wealth”. The chart from Vanguard shows that how we think about and measure investment success is not only largely defined by our goals, but also by the time horizon used to measure those goals.

As mentioned earlier, the end of 2018 was very challenging and, in our opinion, was exacerbated by several events that we do not believe will have lasting economic impacts, including year-end tax loss harvesting and heightened political rhetoric. It is common to see financial markets snap back after a period of steep losses. And while we are only two weeks into 2019, the markets have started to recover as shown below in the 2019 YTD (Year-To-Date) Returns chart.

 

                                       Source: Morningstar

 

At Madison, we invest for the long term which, for our clients, represents their lifetime if not longer. We do not try to predict short-term market outcomes. We focus on what is knowable. We don’t invest only when the coast is clear – because the coast is never clear. Constructing a prudent portfolio with elements of growth and income has shown to help protect wealth when markets are volatile. Uncertainty about the future is the norm, and without uncertainty, potential higher returns rarely exist.

We thank you for the trust you place in Madison Wealth Management and wish everyone a prosperous 2019!

Important Note: This material is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. The opinions expressed herein are those of the named advisors at the time written.  Actual economic or market events may turn out differently than as presented. © 2019 Madison Wealth Management