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2018 Was A Year To Remember For U.S. Stocks

Posted Saturday, December 29, 2018 by
Shain Vernier • 3 min read

With only one trading day left in 2018, it is a good time to recap the past 12 months and look ahead to 2019. Trade wars, Brexit proceedings, and geopolitical issues around the globe have highlighted the action. As the final hours of 2018 pass, one has to wonder what is in store for the coming financial year.

Volatility Is The New Norm In Finance

At this time a year ago, the financial landscape was very different. The Greenback was lagging, U.S. stocks were on the bull, Bitcoin (BTC) was the new bullion, and gold was enjoying relative stability. 12 months later, these markets have seen considerable change:

  • Bitcoin has fallen from $20,000 to $3500
  • Gold trading has been muted, featuring a modest loss from $1350 to $1290
  • The DJIA has experienced unprecedented volatility on the way to posting a negative year
  • The USD Index had a bullish 12 months, closing above 95.000

Among the losers for 2018 have been cryptocurrencies, WTI crude oil, and soybeans. Winners have been hard to come by. However, if one had to pick, the USD is not a bad selection. Significant gains vs EUR, GBP, and CAD have highlighted a FED-driven year for the Greenback.

The DJIA Is Officially In Correction

Perhaps the single greatest takeaway from 2018 has been the high levels of consistent volatility present in the marketplace. Large daily trading ranges became the norm in currencies, commodities, and equities. For a prime example of this phenomenon, take a look at the weekly chart for global equities benchmark, the DJIA.

Dow Jones Industrial Average (DJIA), Daily Chart
Dow Jones Industrial Average (DJIA), Daily Chart

In comparison to those of 2017, the weekly ranges observed in the DJIA for 2018 have been enormous. December has taken stock market volatility to a new level, one rarely seen by equities investors. Going into 2019, here are a few things we know about the financial landscape:

  • Global economic growth is predicted to remain positive but fall from current levels during 2019.
  • U.S. FED policy is now “flexible,” meaning a dovish tone may be just around the corner.
  • There is no end in sight for the U.S./China trade standoff.
  • Technically, the U.S. indices are now in correction. The DJIA has broken beneath the key 38% retracement level of the Trump Rally (24,175). This market is no longer trending north, a signal of growing skepticism about growth prospects and U.S. political stability.

Add it all up ― uncertainty is ruling the marketplace and the economic tides are changing.

A Few Predictions For 2019

A year-end recap isn’t much good without a few predictions on what 2019 may hold. Here are some that I have been kicking around for the past several months:

  • The U.S. FED will remain relatively hawkish, even amid a slowing economy. I expect 2 rate hikes for 2019.
  • It will be a ho-hum year for the U.S. indices. The economic conditions will remain good enough to avoid a major retracement, but I think the DJIA will close next December in the 20,000-22,500 range.
  • U.S. politics will rule the markets amid a split Congress and the approaching 2020 Presidential election. I expect volatility levels in commodities and equities to become even more extreme as 2019 wears on.
  • The USD will hold its ground, but a rally in safe-havens is likely to begin toward the 4th quarter. Look for gold to close 2019 above $1500, with the CHF and JPY making significant moves against the Greenback.

Most of the time, predictions aren’t worth their weight in salt. The beauty of active trading is that we are allowed to change our minds in an attempt to secure market share. Remember, there are only two rules in trading:

  1. Always make money.
  2. See rule number one.

Here’s to you and may 2019 be your best year yet on the markets!

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