On Monday, we released our Capital Markets Update for Dec. 31, 2018. It was bleak with the S&P 500 down 13.5% in the quarter, emerging markets led downward by China, and developed international down led by concerns over Brexit. To compound the declines the Bloomberg Commodity Index was down 11.3%, and REITs were down 8.4%.
In meeting with clients, we work hard to decouple the performance of the market with that of the economy, both global and domestic. To that end, there were some positive items of note:
- Real GDP grew at an annual rate of 3.4% in the third quarter of 2018
- The current economic expansion is in its 10th year
- 312,000 jobs were created in December
- Consumer spending was up 0.4% in November
This is in no way my bull market prediction for 2019. Political concerns and the potential for slower GDP impacted by proposed tariffs are difficult to ignore, as is a decade old economic expansion with significant U.S. equity returns.
It is, however, a reminder to expand the timelines at which you view returns. A $10,000 investment in the Russell 3000 made on Jan. 1, 2008, would have grown to $34,000 over the past decade. Committees should stick to the fundamentals in times of volatility. We recently published our white paper on how to select and monitor investment managers. When markets are ugly, it’s more important than ever to focus on the process. A well-run process will eventually yield the long-term market returns upon which defined contribution plans and participants are dependent.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice. Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.