Stocks ended the year in the red, a downturn not seen since the height of the financial crisis a decade ago. The market gyrations have left investors both poorer and apprehensive about what's to come, with some analysts questioning whether 2019 could usher in a "bear" market or even another recession.
The year concluded in an almost polar-opposite mood to the frothy optimism of early 2018, when President Donald Trump's tax cut was projected to boost consumer spending, supercharge corporate profits and burnish investor portfolios. When the Dow jumped 5 percent in January, Mr. Trump touted his policies' impact on the market and broader U.S. economy.
A year later, how things have changed. The Dow ended 2018 with a loss of 5.6 percent. The S&P 500 shed 6.2 percent, while the tech-heavy Nasdaq declined 3.9 percent.
The market sell-off started in October amid heightened fears about Mr. Trump's trade war with China and the Federal Reserve moving to gradually raise interest rates to keep the economy from overheating. The latter led to a series of blistering attacks by the president on Fed chairman Jerome Powell, whom Mr. Trump accused of roiling markets.
On top of those worries, investors are also fretting about a slowdown in U.S. and global growth, America's ongoing government shutdown and even the risk of a possible recession.
"These issues have given market participants too much uncertainty to shrug off," John Lynch, chief investment strategist at LPL Financial, wrote in a research note.
It's no wonder investors fear they're witnessing the end of a decade of economic growth and soaring market gains, according to a separate LPL Research analysis. "Threatening issues such as trade, monetary policy or global politics" could result in continued volatility, the financial firm cautioned.
Here's how 2018 stacks up, and what experts predict for the market in 2019.
$15 trillion in lost weath
The global equity markets had shed $15 trillion between a peak on Jan. 28 and early December, according to a calculation from Bloomberg. Stocks across the globe suffered amid concerns about economic growth and trade tensions between the world's economic superpowers, the U.S. and China. Among the biggest losers are tech companies like Apple, where concerns about the trade war with China and slowing consumer spending are weighing on formerly high-flying stocks.
9 of 10 asset classes lost money
Almost all asset classes lost money in 2018, according to a Deutsche Bank analysis. Major global markets are in retreat, as well as commodities like crude oil and gold. "2018 was a challenging year for fixed income, with only cash alternatives and shorter-maturity securities showing positive year-to-date returns," Peter Wilson, global fixed income strategist at Wells Fargo, said in a report.
A near-bear market in U.S.
The S&P 500 index sank 19.8 percent from its Sept. 20 peak through Christmas eve, putting it a hairbreath away from bear territory, or when a market falls 20 percent from its most recent high. "Should the S&P 500 end the month where it closed on Christmas Eve, December would mark the third-worst month ever for stocks, behind only October 1987 (-21.8 percent) and October 2008 (-16.9 percent)," John Lynch, chief investment strategist at LPL Financial, wrote in a note.
But China's even worse
To put it into perspective for U.S. investors, the markets in China suffered far worse in 2018. China's benchmark index, the CSI 300, shed 26 percent of its value during the year amid concerns about slowing economic growth and the impact of its trade war with the U.S.
2018's gains mostly went to ...
Some investors pulled ahead in 2018, but only those who, in the immortal words of TV host Robin Leach, enjoyed champagne wishes and caviar dreams. Investors in high-end wine and other luxury assets enjoyed a positive return on their investments. Fine wine returned 10.3 percent this year, according to the Liv-ex Fine Wine 1000, an index that tracks 1,000 expensive vintages.
Will recession strike?
Despite the market rout, economists and Wall Street analysts stress that the U.S. economy remains solid, lessening the risk of a near-term recession. "The good news is that we feel confident that the U.S. economy will NOT fall into recession," Bruce A. Bittles, chief investment strategist at Baird, told clients. "This is important because a cyclical bear market historically produces a decline of 25 percent from top to bottom on average. A recession would likely cause significantly more damage."
Previous recessions were sparked mosty by one of two issues, an overheating of the labor market accompanied by a spike in inflation or a financial deficit in the private sector, such as the 2008 housing crisis, noted Goldman Sachs' analysts. But neither of those issues appear to be looming, they noted.
What's next for stocks
Opinions are mixed on where markets are headed next year. "Don't bank on the U.S. stock market recovering in 2019," warned Capital Economics earlier this month, citing the potential for slower economic growth.
Others are more sanguine, highlighting low U.S. unemployment, strong consumer spending and healthy corporate profits.
"There are plenty of potential catalysts to push stocks higher," LPL's John Lynch noted. "We're already down about as much as we have historically seen during a typical non-recessionary bear market, which is what we think this is."
2019: What the pros advise
Even as stocks whipsaw from day to the next, investment advisers agree on one thing: Don't panic. Bailing out of the market can mean missing out on sharp gains, such as December 27's historic rise of more than 1,000 points for the Dow.
Still, investors may want to rebalance their portfolios regularly, especially for investors who may have a larger equity allocation than they had planned after the decade-long bull market, Wells Fargo said.
"We understand that experiencing market declines—or the frequent ups and downs we saw at the end of 2018—can be unnerving for any investor," LPL said. "These can be the hardest times to remember that volatility does not necessarily mean that the bull market is over or that a recession is looming, and that it is in fact a normal part of investing."