Below is a snapshot of last week’s market performance and what to watch in the week ahead from Chadd Mason, Cabana CEO and co-founder.
I would like to start this week’s commentary off by thanking all of our clients for their support and trust in us. I got into this business because of a series of unfortunate events that occurred when my family trusted a professional adviser and bank. I saw my grandfather’s estate cut in half during the 2000-2002 bear market. I truly believed that there was a better way, and I was going to find it. We have spent the better part of the past two decades working to do just that. A lot of so-called professional advisers tout their abilities and smarts, whether they work for big famous firms, or have the latest mousetrap, but at the end of the day the proof is in the pudding. Everyone is a genius when markets are going up. The true test of an adviser’s worth is when things get tough – like really tough. At Cabana, we built everything we do with this in mind. So first and foremost, I want to say how much I appreciate you being our partner in this greatest of endeavors called investing. Now let’s talk numbers and the state of the current market.
According to Deutsche Bank, 2018 officially has been the worst year for investors of all types and across all investments since 1901, when such records started being kept. You read that correctly – this year has been worse than 2008, worse than 2002, and worse the Great Depression. Below is a Bloomberg and Morgan Stanley chart of asset class performance over the past 15 years (Exhibit 1), which provides a good visual depiction of what I am talking about. As you can see, EVERYTHING is in the red. The investments at the bottom did the worst and the ones at the top did the best (relatively speaking). I have commented on this over the past few weeks and things have just gotten worse – a lot worse! As of market close on Christmas Eve, the U.S. stock market was down 21% since October 1. It was down 16% in December and 10% in the past week alone. Huge widely held stocks like Apple, Google and Facebook are down 37%, 24% and 43% from highs made in the second half of this year. This now qualifies as tough – really tough.
On August 20, I pointed out that the U.S stock market was the only market in the world that was holding up and the divergence between the U.S. equity market and other asset classes was the greatest in fourteen years. I worried that we had “a lot of weight pulling in the opposite direction.” Something had to change. Either other asset classes had to catch up or the U.S. market would fall. Unfortunately, it was the latter. With all of that said, we have a week left of trading in the month and anything can happen.
I hope that everyone is taking some time to enjoy family and friends this holiday season. Those are always the things that matter most.
A full version of this week’s market commentary with Cabana’s YTD performance is available at the following link Cabana Weekly Market Commentary December 24 2018