Nov 20, 2018

Fear and flatlining: The stock market's brutal 2018

After an epic 2017, the three major U.S. stock market indices are trending toward a negative year in 2018, with a return to volatility and puzzling sell-offs after strong — but not astronomical — earnings numbers in formerly stalwart U.S. stock sectors.

Data: Money.Net; Chart: Harry Stevens/Axios

Between the lines: Maybe the valuations were a little too hot, or investors were spoiled by double digit returns.

  • Perhaps it's people looking at the economy and forthcoming interest rate hikes and deciding to sell off now in case things turn south.
  • Or maybe it's the fear of second-order effects from a potential cold war with China.

The other side: “This sort of price action is extremely normal,” Peter Lazaroff of Plancorp told MarketWatch. “What was strange was the outsized returns investors have earned in recent years with effectively no volatility.”

Driving the news:

  • The FAANG stocks (Facebook, Amazon, Apple, Netflix and Google) have collectively lost $1 trillion in market value from their 52-week highs.
  • Four out of the 5 worst performing S&P 500 stocks today were retail companies (L Brands, Target, Ross Stores, and Kohl's), per FactSet.
  • In the last 3 months, the Volatility Index (VIX) — a fear indicator on Wall Street — has surged more than 50%, per FactSet. The gauge still remains low by historical standards, but it's producing big daily swings like the chart shown below.
Data: Factset; Chart: Lazaro Gamio/Axios

The bottom line: Enjoy the holidays and get some rest. December and 2019 could be a wild ride.

Go deeper

Wall Street has its best year since 2013

Data: FactSet; Chart: Axios Visuals

Wall Street had its biggest annual gain in six years — with the S&P 500 rising 29% and the Nasdaq Composite rising 35% in 2019. The Dow lagged behind other indices, but saw its biggest yearly gain since 2017.

Why it matters: U.S. stocks rebounded from 2018's year-end meltdown to log impressive gains, despite uncertainty stemming from the trade war and a slowdown in economic growth.

AMD's hot 2020 start could lead to another S&P record

Data: Investing.com; Chart: Axios Visuals

AMD was the best-performing stock on the S&P 500 in both 2018 and 2019, and it got off to a hot start in 2020, rising 7.1% on Thursday to touch a fresh all-time high.

The state of play: The stock rose nearly 80% in 2018, despite falling 40% during that year's disastrous fourth quarter, and it gained 148% in 2019, according to MarketWatch. The company's previous record high stock price was set June 21, 2000.

Go deeper:

When war pays dividends

Illustration: Aïda Amer/Axios

War. What is it good for? The stock market, it turns out.

The big picture: Don't pay too much attention to short-term stock-market gyrations. When you take a step back, it looks like war tends to be good — not bad — for American stocks.

Go deeperArrowJan 9, 2020