Just In: Our 2018 Predictions Scorecard
Exactly one year ago, I cautioned you to expect the unexpected in 2018.
After the market action we’ve experienced this year, unexpected might have been a huge understatement.
In what has become an annual ritual, we end the year with a quick list of crazy market predictions for the upcoming year. But before we get into our wild guesses for 2019, you need to see how our 2018 predictions fared.
But first, my annual predictions disclaimer:
For the record, I don’t care if I’m wrong about my market predictions. As I’ve explained countless times before, even the best market predictions are nothing but empty guesses. Mine are no different. Sure, I use all the tools at my disposal to try to forecast what the market could do in the year ahead. But I’m not delusional.
Here’s the bottom line: I can’t control the stock market. No one can. I never fight the tape if I’m wrong. Instead, I change my outlook. That’s the only way to survive as a trader.
Alright, let’s get to the good stuff…
The Missing Melt Up
Prediction: “I don’t think we’ll see the S&P, Dow Jones Industrial Average, and Nasdaq Composite churn out wimpy, single-digit gains,” I wrote for my first 2018 prediction. “In fact, I see stocks finishing much, much higher.”
Result: The S&P 500 is down almost 3% year-to-date, failing to extend its melt-up rally into the fourth quarter.
Comments: My “much, much higher” prediction still had a fighting chance heading into the fourth quarter as the S&P launched toward double-digit gains by the final trading days of September.
I admit this wild call was a bit of a reach. But what fun are mundane market predictions? If we did see a 20% gain this year, the S&P 500 would have posted two-year returns approaching 50%. That would have been one epic bull…
But the correction has now pushed the market to the brink of a nasty breakdown. While stocks rocketed higher right out of the gate in January, the averages quickly got ahead of themselves and the melt up turned into a meltdown by early February.
My guess that the S&P 500 could post gains of 20% or more this year came with an important caveat. Since the S&P 500 had not experienced a 5% pullback in more than 13 months, I said 2018 would bring at least two pullbacks of 5% or more. With two double-digit corrections under our belt this year, the major averages made up for their lack of gains with some extra volatility.
Conclusion: The S&P’s lackluster performance in 2018 busted my big call — and nailing the part about the two pullbacks is mostly irrelevant. I award myself no points, and may God have mercy on my soul.
Bitcoin’s last dance?
Prediction: “We’re going to experience an epic bitcoin crash,” I wrote last December as the entire world was going crazy over cryptocurrencies. “Bitcoin will crash at some point in the next 12 months, losing at least half of its value,”
Result: After a ridiculous December rally that saw bitcoin approach $20,000, the flagship cryptocurrency has fallen off a cliff. As of this morning, it’s approaching new year-to-date lows near $3,200.
Comments: Bitcoin and other cryptos thrived in their “Wild West” mania phase in late 2017. Bitcoin had all the makings of a historic bubble — and the rapid price appreciation attracted immense attention. By December, the price of a single bitcoin was fluctuating thousands of dollars every single day.
With prices moving so fast, countless analysts and money managers were sounding the alarm. Sure, bitcoin and its cryptocurrency cousins had made some forward-thinking investors a lot of money. But with price going parabolic, I reasoned a hard reset would soon follow.
Now, the entire cryptocurrency market is dealing with some growing pains. I said the crash would be terrifying. But it might also offer up a massive opportunity for investors. We’re still waiting to see if that second part comes true…
Conclusion: While bitcoin’s future remains uncertain, I was right to guess it would lose half its value (and then some) in 2018. As a bonus, internet trolls furiously attacked me for my bearish bitcoin stance for the better part of the past year. Was it worth it? Absolutely.
Prediction: “The easy ride for the FANG stocks will finally end,” I wrote for my final 2018 prediction. “These stocks will stop rocketing higher every month. Some of them might even underperform the averages.”
Result: Tech stocks — even the FANGs — have been some of the hardest hit names during this correction.
Comments: When we turn back the clock to look for signs that the FANG trade was getting a little long in the tooth, the first event that will stick out will be the 2017 launch of the NYSE FANG+ Index futures. This market offering trimmed the fat and gave us the most-hyped tech names to trade — in one package.
The index is made up of the four original FANGs plus Alibaba, Baidu, Nvidia, Tesla and Twitter. The FANG+ Index futures has packed the market’s hottest stocks into one trading vehicle. As I mentioned the day it launched: that should set off some alarm bells.
FANG futures aside, I expected this group to come under pressure this year because of how well they had performed. Facebook and Google were already attracting negative attention over privacy concerns late last year. Others questioned whether Amazon is quickly becoming a retail monopoly. We were overdue for some backlash — and we got plenty in 2018. The lesson here is that sweetheart status for even the most popular companies is never permanent.
Conclusion: The FANGs fell back to earth this year, proving this prognostication correct. I only wish I had shorted some of these flameouts as the stocks began to crack…
Stay tuned… fresh market calls for 2019 are on the way this week.
Want to get in on the action?
Send me your best and boldest market predictions here: firstname.lastname@example.org
PS: “America’s Most Hated” cable companies are mad as hell. A brand-new internet technology with the code name “Halo-Fi” promises to be faster than cable yet, by my estimates, over 7 times cheaper, which could save you an easy $19,494.
Everything shifts December 18, so there’s no time to lose. Discover the full story here…