Happy New Year! As for the last one, at least the last quarter, good riddance! Concerns that the Fed may have applied the brakes a tad too long, an escalating trade war with China, ongoing Brexit drama, and a eurozone confidence slowdown resulted in one of the worst quarters for equity markets since the 2008-09 bear market. The selloff began when the Fed Chairman suggested that further rate increases were on the horizon. That sparked volatility that ultimately saw most equity markets fall 20% or more below previous highs, which is the classic definition of a bear market.
By most metrics, we are now in a bear market (20%+ fall in prices). It is easy to look back and say that you saw it coming. You may be feeling regret about the losses we have incurred since the peaks back in January. And all of that is perfectly normal. As will be claims by some that they could help you avoid periods such as this.
For the five-year period ending October 31, 2018, the S&P 500 Index had an annualized return of 11.34% while the MSCI World ex USA Index returned 1.86%, and the MSCI Emerging Markets Index returned 0.78%. The under-performance of many foreign markets again this year have led some of our clients to question the role that global diversification plays in their portfolios, some might even be reconsidering the benefits of investing outside the US at all.