By: Rick Walter, CIO
It was a tough year to make any profits using our index-based approach to investing, as the markets continued to move downward in lockstep with political drama domestically and internationally. Our tech-heavy, simulated portfolios were no match for the widespread panic and fear that gripped the overall markets.
Dow, S&P 500 and Nasdaq sell-off
It’s hard to find a fund or asset manager that have not been affected by the continued market slide which started on September 21, 2018- (a market high). As the year wore on, nothing seemed to matter, as panic continued to grip the entire market causing many investors to sell otherwise very good positions in companies whose earnings were very strong in the previous quarter with many companies earning above analyst consensus and market expectations.
Continued Volatility in 2019
Based on my experience and analysis this intense sell-off is a combination of a structural selloff- stemming from the unintended consequences of the 2018 tax law, developing economic headwinds and political uncertainty in Washington (a perfect storm of events). These events and others will continue to rumble through the financial system and cause massive losses for many. We are expecting continued volatility and heavy selling to continue, through 2019 and possibly into 2020.
Don’t try to buy on the bounce because there isn’t one. Averaging down or up may be the only medicine of the day. We prefer that investors pause and not make any new investments currently. Other strategies may include moving to more liquid investments like treasuries until there is some type of real political leadership in Washington.
If you need to harvest capital losses for 2018 tax preparation, you should have no problem at all finding losses to write-off. There is plenty to go around.
Have a Happy New Year in 2019!!