Financial Outlook for 2019

BY: FAZAAD BACCHUS 

Have you been an investor during the last nine years? More than likely you saw good returns over those years, but something changed last year. It is said that the market takes a negative turn every seven years and since 2016 every investor has been on the lookout for a bad year as it had come to the end of its seven-year good run. Last year however was a shocker for many people. I’d like to share last year’s performance with you.

TSX negative 8.89%; Dow Jones negative 3.48%; S&P500 negative 4.38%; NASDAQ negative 2.84%; Russell 2000 negative 11.01%; MSCI ACWI negative 8.20%; MSCI EM negative 14.25%; Nikkei 225 negative 12.08%; Hang Seng negative 13.61%; DAX negative 22.16%; FTSE negative 14.11%; Oil negative 24.8%. Every single index or stock trade market had losses last year. These losses you will see in your upcoming statement when you receive them in January.

What caused these losses and are we expecting the same this year or worse? So, let’s start with what caused them: NAFTA, the trade agreement between the USA, Canada, and Mexico. This took a toll on markets due to the uncertainty of what final agreements there would have been. A trade war between USA and China regarding tariffs. This was a big one that caused many markets to report losses. The FEDS raising interest rates, another big one causing equities sell-off. And finally, the USA government shutdown, currently still on as I write. These four things have caused a major disruption to the markets in 2018 and no one could have foreseen it.

This is not a recession, neither are there signs of a recession but what is to be expected going forward in 2019. First of all, the fundamentals for good returns on investment equity are still there. Housing starts are still good, employment is good, there is no over inflation, trade will resume once matters settle down, oil should level off at its price equilibrium and so forth. But the digits that you were accustomed to in the past years are not the kind that you may expect to see going forward.

2019 is expected to continue with volatility, perhaps not as aggressive as it did in 2018, but surely far more than it did in previous years. Double digits are not on the horizon, but due to strong fundamentals, the market is expected to provide a positive return this year. Expected and provide are again two different things. When fundamentals are good and markets are performing an unexpected exogenous shock can send market reeling. These exogenous shocks are not planned for and take the market for a quick fall.

What do you do then for 2019? Having experienced negative returns on your portfolio for 2018, do you make a decision that you would rather not be invested? Perhaps that might be a better choice for you, but it ought not to be because you are not making money, it ought to be because you are unable to handle the fluctuations. However, should you decide to stay in the market, you must choose good investment funds which balance out your portfolio. Over time, the market produces a positive return, but the operative word there is over time. Choose good investments for 2019 and you may stay ahead.