Investors around the world saw negative investment returns in 2018, with almost every equity market yielding negative investment returns (only Qatar realized positive returns). Bond markets did not fair much better - some bond indices generated small positive returns, and some generated slightly negative results. It is not all doom and gloom though, as we have had it pretty good in recent years. For example, last year marked the first year the S&P 500 Index, yielded negative investment returns in a decade. To be clear, there have been several instances over the past decade when markets declined in value, it just so happens, however, that each time a decline occurred in the most recent decade, those losses were more than offset by gains at other times during the same calendar year. As arbitrary as it may seem that we start evaluating a year on January 1st, and conclude our assessment on December 31st, this is "the way it has always been done".
In our view, it is more relevant to assess financial markets based on a rolling time-period basis. When we do so, we find that financial markets yield positive investment returns between 70% and 75% over 12 month periods, depending on the country. The only catch is we cannot (nor can anyone) tell you when markets will turn temporarily negative. "Temporary" being the operative word in that last sentence, as every market setback is followed by a recovery that results in new highs. What we can tell you, is that market fluctuations are the norm, not the exception to the investing rule. Successful investors need to anticipate the temporary setbacks they will inevitably experience, and maintain discipline with a portfolio they are comfortable owning if they have any hope of realizing the long-term gains that markets have historically delivered. This time isn't different, nor will it ever be.
For our full report detailing 2018 Market Performance, please click here.