The last week of the year did get off to a bad start as U.S. stocks plunged on Monday in their worst day of Christmas Eve trading ever. The S&P 500 was entering a bear market, the S&P E-mini contract breaking down through the 2,350 level. In a word, Christmas chaos!
Against all odds, U.S. stocks suddenly soared on Wednesday, staging one of the biggest rallies over the last 10 years after the historic loss of Monday, with major indices surging at least 5 percent. It seems that this market rebound was driven by massive investment flows coming from U.S. pension funds which needed to tweak their portfolios before the end of the quarter.
In this very unusual situation, all the U.S. indices managed to finish the week (as of 28/12) in the green (S&P500 +2.86 percent, Russell2000 +3.56 percent) in contrast with their Asian and European peers (MSCI EMU -0.44 percent ; Nikkei -0.75 percent). All the sectors were up in the U.S. except utilities (-1.93 percent WTD but it was the best performer a week ago). However this shallow bounce did not allow stocks to recover from the heavy losses suffered at the end of the year. All the broad-based indices exhibited negative returns in 2018, the worst results since the financial crisis of 2008. It should also be noted that there was no safe-haven investment if we excluded U.S. dollar deposits. High-yield, investment grade corporate bonds and T-notes finished the year in the red. The same held true for commodities from precious metals to crude oil (GSCI down almost 14 percent in the wake of WTI crude losing nearly 25 percent). To put it bluntly, a record share of asset classes posted negative total returns in 2018! We had never seen such a sea of red since the beginning of the last century.
In these uncertain times, all the evidence suggests that equity markets will be buffeted again by the 2018 headwinds next year: Fed tightening, US-China trade war, Brexit conundrum, slowing global economy to name a few.
Find the full report here : https://www.trackinsight.com/weekly-flow-report/2018-12-28/global
