The year 2019 served up many examples of the unpredictability of markets. Interest rates that US policy makers expected to rise fell instead. American consumers’ confidence weakened as the year began, and new headlines broadcast fears of an economic slowdown. But investors who moved onto the sidelines may have missed the gains in the US stock market. As of the end of October, the S&P 500 was up more than 20% for the year on a total-return basis. That put it on course fo the best showing since 2013 should that gain hold through December.
Outside the US, Greece—the site of an economic crisis so dire some expected the country to abandon the euro earlier this decade, and a country whose equity market lost more than a third of its value last year—has had one of the most robust stock market performances among emerging economies in 2019. Taken as a whole, it’s a reminder that the prediction game can be a losing one for investors.
Events weren’t easy to anticipate in the global equity markets, where no evident link appears between markets that performed well last year and those that have excellent this year, as the image shows. Among the 23 developed market countries, only one country was a Top 5 performer for 2018 and 2019: the US. Last year’s strongest performing market—Finland—ranked 22nd this year through the end of October. Among emerging markets, Greece swung from a 37% decline last year to a 37% advance this year through the end of October.
History has shown there’s no compelling or dependable way to forecast stock and bond movements, and 2019 was a case in point. Neither the mainstream prognostications nor hindsight of recent strong performance predicted outcomes in 2019.
Rather than basing investment decisions on predictions of which way equity markets are headed, a wise strategy may be to hold a rang of investments that focus on systematic and robust drivers of potential returns. Investors who were broadly diversified across asset classes and around the globe were in a position to potentially enjoy the returns that the markets delivered thus far in 2019. Last year, this year, next year—that approach is a timeless one.