Dow, S&P 500 post worst December since 1931, as Nasdaq has worst on record

By StocksFOXBusiness

Dennis Gartman: We will have a ‘modest’ recession in 2019

The Gartman Letter editor Dennis Gartman on why he believes that there will be a small recession next year.

2018 may be remembered as the year the Grinch stole your retirement or stock investment account.

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December was the worst month for the Dow Jones Industrial Average and the S&P 500  since 1931, as tracked by our partners at Dow Jones Market Data Group. The S&P 500, the broadest measure of stocks, lost 9 percent and the Dow over 8.5 percent.

For the year, stocks turned in the worst performance since 2008.

U.S. Stocks Have Worst Year Since 2008, Worst Dec. Since 1931

    DJIA: -5.6%

    S&P 500: -6.2%

    Nasdaq Composite: -3.9%

    *2018 Performance 

While the economy isn’t facing 1931 challenges, which at the time was the Great Depression, headwinds are building.

Dow Jones Industrial Average - Worst Years 

    • 1931: -52.67%
    • 1907: -37.73%
    • 2008: -33.84%
    • 1930: -33.77%
    • 1920: -32.90%

    Source: DJ Market Data Group

“We are facing some speedbumps,” Michael Block, managing director and market strategist at Third Seven Advisors, told FOX Business in December. “The economy is starting to slow, GDP is not the 3 to 4 percent we were promised,” he notes. Additionally, the Federal Reserve lowered their GDP forecast for 2019 to 2.3 percent while indicating it will also slow the pace of planned rate hikes next year. The announcement came at the conclusion of their December meeting.

S&P 500 - Worst Years 

    • 1931: -47.07%
    • 1937: -38.59%
    • 2008: -38.49%
    • 1974: -29.57%
    • 1930: -28.48%

    Source: DJ Market Data Group

To Block’s point, the economy is expected to grow about 2.7 percent, as forecasted by the Federal Reserve Bank of Atlanta’s GDPNow, in the fourth quarter. That’s a drop from the robust 4.2 percent in the second quarter and 3.5 percent in the third. Block is also concerned favorable fiscal policy has petered out, as he noted in an open letter to President Trump.  Trade spats also remain a worry.

Plus, more worrisome headlines are popping up. Dow transports component FedEx, a global economic barometer, cut its 2019 profit outlook in December. CEO Fred Smith said while the U.S. arm remains solid, “[the company’s] international business, especially in Europe weakened significantly” since September’s results. Case in point, Germany, Europe’s largest economy, contracted 0.2 percent in the third quarter and its stock market, the Dax 30, is now in a bear market, off 20 percent from its high. In the U.S. the S&P 500 and the Nasdaq Composite also dipped into bear markets.

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While there are still bright spots in Trump’s economy, such as an unemployment rate at 3.7 percent, the lowest level since 1969, and more job openings than workers available to fill them, some investors don’t see the momentum for the economy continuing in 2019.  “Recent client meetings indicate that many investors believe the US economy will enter a recession in 2020,” said Goldman Sachs in a mid-December US Weekly Kickstart note.  “The market path in 2019 will depend on investor perception of the longevity of the current economic expansion,” the firm added.

On Friday, New Year's Eve the firm updated its forecast. While initially expecting the U.S. economy to expand at a pace of 2.4 percent in the first half of 2019, Goldman Sachs reduced that outlook to 2 percent. In the second half of the year, its outlook is even weaker, at 1 ¾ percent. On a brighter note, the firm’s experts said they are not overly concerned about the prospects of a recession. In fact, they even believe a slowdown is even necessary to “land the plane.”

Other experts share that opinion. During an interview with Fox News Sunday over the weekend, Allianz Chief Economist Mohamed El-Erian also said he doesn’t believe a recession is a likely. “It’s certainly not becoming a reality,” El-Erian told Fox News Sunday. “You would need either a major policy mistake or a massive market accident to push us into recession. But we will slow down unless we build on the pro-growth policies.”

TickerSecurityLastChange%Chg
AMZNAMAZON.COM INC.1,801.38-14.74-0.81%
NFLXNETFLIX INC.298.99-10.39-3.36%
MSFTMICROSOFT CORP.137.26-1.15-0.83%

As for the Nasdaq Composite, the younger cousin formed in 1971, it had its worst December on record down  9.5 percent. But tech giants including Amazon, Netflix and Microsoft are among the stocks that will celebrate 2018 as the year of double-digit gains. “You gotta go where the growth is,” notes Block.

FOX Business' Brittany DeLea contributed to this report.

*The orginal story published on 12/19/18 was updated on 12/31/18.