Market Recap

Scott Kays, CFA, CFP®

December 7, 2018

This year has been a tough one in a lot of ways for investors. For most of the year, the major indices were showing gains, but this masked a lot of turbulence going on under the surface.

Most people use the S&P 500, which consists primarily of large U.S. companies, as their reference for how the stock market is performing. The S&P 500 is a capitalization-weighted index, meaning the larger the company, the bigger its influence on the index’s return.

While domestic and geopolitical concerns continued to make daily headlines, the major stock market indices experienced another positive quarter. The 3rd quarter extended the upward momentum, allowing equity investors to continue enjoying solid returns for 2017.
Political stories dominated the headlines during the 2nd quarter, but investors were the beneficiaries of another set of solid gains for the major market indices although the ride was somewhat bumpy. Stocks were strengthened by good corporate earnings, the prospect of possible tax cuts, and strong economic numbers in the foreign markets. This extended gains from the 1st quarter, with the Dow’s YTD change at 8.03% closing at 21,350. The S&P YTD change through 6/30/17 was 8.24% closing at 2,423 while the NASDAQ was up 14.07% closing at 6,140 for the same time period.

Stocks rose solidly in the 1st quarter of 2017 as momentum from November’s presidential election kept the rally going. Led by the technology sector, which had done very little after the election, equities started the year with very strong gains. Despite backing off of all-time highs, the Dow rose 4.6% to close at 20,663, marking its sixth straight quarter of gains.

The year 2016 started out tough for investors and brought with it many surprises.  Looking only at the year’s final numbers, one may never have never known how much of a bumpy ride it was for both equity and bond investors. During the 4th quarter, stocks surged, extending the bull market that is now almost eight years old.  The election of Donald Trump had investors thinking about lower taxes, less regulation, pro-­business initiatives, and what could be a very bumpy ride while unwinding many of the Obama administration’s policies. 

Following the Brexit vote in June, the 3rd quarter of 2016 was fairly uneventful. The major stock market indices started off the quarter with a small rally and stayed quiet until the first week of September. This included a period of somewhat lower volatility with the S&P 500 going 42 trading days without moving more than 1%. Volatility then reared its ugly head on September 9th with the Dow dropping 2.1% along with the S&P 500 and NASDAQ dropping by 2.5%.
For the major stock market indices, the 2nd quarter of 2016 was anything but dull. Overall, this year has been very volatile, and we are only halfway through. Although recent events in the United Kingdom have dominated the headlines, it was only a few months ago when the big global concerns were all about Asia and specifically China. Lower oil prices, and those economic issues surrounding them, also seem like distant memories.
We now seem to be experiencing the “calm after the storm” that started the first week of 2016. Investors experienced an unusually volatile start to the year, and as of March 31st, the U.S. stock market ended the quarter higher than it started the year.
Stock market volatility was the order of the day during the majority of 2015. Most major stock market indices were negatively affected by economic stress in China and Greece, coupled with underwhelming corporate earnings reports, falling oil prices and terrorist attacks here and abroad.
The 3rd quarter of 2015 was a tough one for investors. For nearly four years, stocks had been heading in one direction, up! However in August, the S&P 500 officially entered correction territory