A Wild Ride Ahead?

In 2017 the U.S. stock market enjoyed one of the smoothest rides in history. Volatility (the up and down movement of stocks) was low. There were no wild gyrations. What movement there was mostly followed a smooth, upward trend.

Contrast that with the last few trading days of 2018 and early days of 2019 and it is a far different picture.

Here are the Dow Jones daily changes over the last ten trading days (December 20, 2018- January 4, 2019).

It was one wild ride.

There were 5 up days and 5 down days.

6 out of the 10 days saw changes of over 400 points either way.

However, the net effect after ten days was a net positive change of 110 points.

If you had gone away for two weeks and had not checked the market in the interim you would have thought nothing of it when you got back.

"I see the market advanced 110 points while I was gone. I was a little worried about my 401(k) when I left for vacation. I am happy to see there was nothing to worry about."

If you had your phone in your hand and were checking the market hourly you had a completely different perspective. You were probably afraid to even peek at the numbers on those big down days

It seems that we may be in for a wild ride this year based on what we are seeing.

There is plenty of worry to go around right now.

Democrats taking control of Congress.

The "government shutdown".

The Mueller investigation.

The Fed raising interest rates and the tightening of credit.

An inverted yield curve.

Trade wars.

Slowing worldwide economic activity.

China.

Brexit.

You could go on and on.

There is always something to worry about.

One of the things I find interesting in looking at the markets in 2018 is how well the United States held up compared to the rest of the world.

There were a lot of stock market losses around the world in 2018 in US dollar-denominated terms.
The reality is, that despite all the hand-wringing about the U.S. market, it was just about the best place in the world to have your money invested.

If you get a little depressed when look at your year-end 401(k) balance you might want to think about the chart by Charlie Bilello below.

That does not mean you should not expect a wild ride in 2019. However, everything is relative.

Most people around the world (especially in Europe) would say the United States has been on a wild ride the last 11 years. However, it was almost always going one way---up.

USA       +111%
France        -3%
UK              -7%
Germany    -7%
Spain         -29%
Italy           -48%

Credit@CharlieBilello
Returns as of 12/28/18

My advice--when investing, it is always prudent to have your seat belt fastened. Wild rides are to be expected every once in awhile.