New Year’s Resolutions

by 27 Dec, 2018

It’s coming to that time of year when we look back and reflect on what happened in 2018, and start to set new goals for 2019.

The art of investing is all about progress, learning and growth. Every investment has lessons to teach us; whether it was good, bad or relatively unremarkable. It always helps to sit down at the end of each year and recall which trades taught you the most, and how you plan to implement those lessons in the following year to make the extra gains that eluded you in 2018.

It may help to look at your best investments to understand why they worked so well, and your worst investments to see why they fell flat. Perhaps your problem was not your individual stock-picking, but rather your lack of diversity in terms of geography, sector or instruments that let you down. In that case, some targeted homework will help you in the iron out the kinks in the long run.

2018 has been a rough year for markets with many of the major indexes and blue-chip companies finishing down for the year after almost a decade-long bull-run. Geopolitical risk has been ever-present throughout the year and caused some major market disruptions.

The ripples of the US-China trade war have spread to all corners of the market, causing a global sell-off in which Asian markets took the biggest knock, falling 15% for the year. Fed rate hikes also helped squeeze equity prices towards the end of the year, making buying opportunities few and far between. Moreover, budget concerns in Italy, Brexit uncertainty and protest action in France all stifled growth in the Eurozone; adding to the overall gloomy picture of the global economy for 2018.

Outside of the equity markets, Oil made a record collapse, dropping more than 40% in two months on concerns of global oversupply. Whilst OPEC’s efforts to curb the decline have failed thus far, analysts are anticipating further measures in 2019 to support cascading prices.

Crypto markets also felt the pinch, falling into a second bear market that severely damaged the credibility of the virtual asset market. Bitcoin’s break below the $6,000 mark was a serious blow for crypto, which looks set for further declines in 2019.

On the currency front, the dollar extended its gains throughout the year becoming a relatively more popular safe-haven than gold. Brexit uncertainty continued to weigh down the pound and emerging market currencies, such as the Yuan, Lira, Rand and Rupee followed suit weakening significantly on global growth concerns.

However, the markets were not all doom and gloom. A number of stocks managed to escape 2018’s general market madness and rake in some healthy profits.

If you missed any of the major winners for the year such as, Etsy (+150%), Turtle beach (+647%) & NIIT Technologies (+80%) then your number one resolution may be to take better notice of your economic calendar or the news. Keeping track of important days, trends or announcements could be the X-factor that will prevent you from getting #FOMO in 2019. But what made these stocks such a success?

Turtle Beach, for example, blew the market away with its explosive growth thanks to some key product developments and new entrants to the gaming market. Online gaming sensation, Fortnite, sent demand for Turtle beach headsets skyrocketing as their sound quality gave players a competitive advantage.

This feature boosted sales by 81%, sending Turtle Beach’s stock price through the roof from a mere $1.76 a share to a whopping $32.33 at its peak. The lesson here is to identify phenomenons like Fortnite, in growing industries like gaming, and invest in the products that change the game (excuse the pun).

Looking towards 2019, the doomsday bell for recessions, known as the inverted yield curve, has already rung with the chances of a future recession reaching almost 40% in the next 18 months. Europe’s political instability combined with Brexit uncertainty will weigh heavily on the largest constituents, Germany and France who are already feeling the effects of weaker growth.

Low investor confidence may continue to affect emerging markets as their high-risk nature becomes less appealing in recessionary times. However, if the US and China manage to find some common ground in the balance of trade we may see some strength return to Asian markets as value investors look to snap up bargains at lower prices.

On the whole, the global growth slowdown will likely set the tone for a harder first quarter in global equity markets. Fixed income may receive a boost from investors seeking lower-risk investments and benefit from a push towards tapering years of quantitative easing and budget deficits. However, the shrewd investor must adapt to survive!

With such a negative global outlook, another resolution may be to be braver when it comes to short-selling because there will be plenty of opportunities for that. So, set new and ambitious goals for the year, and make 2019 the year of learning, fun and progress with Invstr.

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