FXEMPIRE
All

Year of 2018 in the Financial Markets

Contrary to what we saw during the last few years when the last months of the year were usually marked by a rally, this year we had the worst December since 1931 in terms of performance measured in the S&P500, with the index devaluing about 10 percent.
FX Empire Editorial Board
Year 2018

The year 2018 was marked by several unexpected events for the markets. After 2017, which was a year during which we witnessed a strong bull market based on the tax reforms practiced by the Donald Trump Government, 2018 was translated into uncertainty and fear due to the United States-China trade wars, interest rate hikes by the FED, sell-off on oil and some instability in Europe as well.

Contrary to what we saw during the last few years when the last months of the year were usually marked by a rally, this year we had the worst December since 1931 in terms of performance measured in the S&P500, with the index devaluing about 10 percent (currently 2,506 points).

On December 19, Jerome Powell raised interest rates to the range of 2.25 percent to 2.50 percent, putting interest rates at the highest level since spring of 2008. All ten members of the FED agreed on an increase in interest rates.

In the statement that the FED has made, it clearly showed that the labor market remains strong and that the economic activity has also shown a clear robust picture. In terms of risks to the global economic activity, Jerome Powell has made it explicitly clear that they are relatively low. With regards to inflation, what is expected is an increase of 1.9 percent this year and 2.0 percent over the next three years.

Although we might be on the verge of an inverted yield curve, which historically preceded the last recessions, this might not be the case, at least for now. The current American 10-year yield closes the year of 2018 at 2.78 percent, which may not be enough to give a good trade-off to the current stock market, even though it is slightly below related to the historical highs on the stock market and having the relative valuation metrics overvalued.

With some margin of error, it may seem that the market has reached the bottom in terms of the current correction.

We may see the volatility as a permanent factor in the markets may go forward.

A very important note for gold is that its price has been appreciating in the last periods, more specifically at 5 percent since November. There might be some chances for gold to continue the current pattern, taking into account the climate of instability that we still live in and an expected continuation in term of interest rate hikes during 2019. Seeing gold as a market benchmark, or as a medium-term investment, this might be the vision.

By 2019, we may see some sectors that are strategically more interesting than others, such as biotechnology, technology or the sectors related to gold, for example. For a more passive type of investment, there could be some chance for ETFs that replicate the market.

As mentioned earlier, the banking sector might be considered as the one of the most benefited in the context of the rise in interest rates and may also possibly represent an opportunity for investment.

This article was written by Vasco Moura

Disclaimer: Materials, analysis, and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. The author’s opinion does not represent and should not be construed as a statement or investment advice made by TeleTrade. All Indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US