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Your chocolate cake’s gonna cost more

Though we’re just a few weeks into the New Year, I must relay my enjoyment of the Wall Street Journal’s annual year-end review and market outlook section, published on the first business day of the new year. Though it provides restrained commentary on the previous year’s results, thoughtful predictions for the coming year’s markets and some spot-on charting, my favorite part is the segment called “Track the Markets: Winners and Losers.” It’s a two-column, full page-length bar graph of the annual returns more than 100 different investments – asset classes, commodities, currencies, indices. In 2018 only 13, of again 100+ investments, were positive for the year. And leading the pack, by a large margin, was cocoa at +27.7% and wheat at +17.9% — the chocolate cake part. For fans of the 1983 Dan Aykroyd, Eddie Murphy comedy, “Trading Places”, orange juice came in at a negative 7.98%.


Financial markets have never been accused of being logical, and 2018 supported this assertion. Employment, wages and corporate earnings were all up. But investors, in the 4th quarter especially, focused on anticipated rising interest rates and recession fears. Other worries included trade, Brexit, falling oil prices and the Fed chair under siege. For 2018, long-term performance trends flipped – cash outperformed bonds, bonds outperformed stocks. Where then, does all of this leave my 2018 speculations?

2018 Prediction Result Comment (excuse)
GDP growth and inflation both hit 3% Half Growth yes, inflation no
Value stocks outperform growth stocks Nope Not even close
The Fed raises rates FOUR times in 2018 Correct Redeemed myself here!
Central banks will start to limit accommodation Correct Well, at least no one’s still cutting
Not much gets done on infrastructure spending Correct Were you surprised?





If you’re keeping score, that’s 3-1/2, not great, but slightly better than 2017. As I did call for a long-awaited equity market correction, perhaps a letter grade of C+.


For 2019, I remain positive, equities do have room to advance. The 4th quarter sell-off has made stock prices more attractive, the Federal Reserve appears to be taping the brakes on rate increases and the economy and corporate earnings should continue to grow (perhaps just not at the 2018 rate). We still do need to keep an eye on interest rates, oil prices and Washington. And don’t be surprised by large daily swings in the headline stock indices.


For those of you still with me, economic and markets contemplations for 2019:



  1. Employment growth slows as wage growth moves up

  2. Economic expansion continues, but closer to 2% than 3%

  3. U.S. equities are positive in 2019, but do not regain 2018 highs

  4. International equities out-perform domestic equities as the strong U.S. dollar fades

  5. And this one might be too easy, trade and diplomacy issues rattle the markets more than once


I just hope that I do better with these musings, then with my fading 2019 resolutions!