For what is usually a quiet final month of the year, December proved to be a perfect storm of headline risk and macroeconomic concerns. U.S. Federal Reserve Chairman Powell announced the third rate hike of 2018 but didn’t do enough to quell fears of a continued aggressive path to rate hikes going forward, causing bond yields to rise and stocks to sell off.
Internationally, we saw weakening economic data, specifically a drop in Eurozone business confidence and weaker than expected Chinese growth.
Lastly, we saw President Trump demand funding for a border wall and threaten a government shutdown, which contributed to a significant decline in equity markets internationally.
Fortunately, there were some positive takeaways for the month; diversification across equity sectors and asset classes have proven to be invaluable. Firstly, our S&P shariah index solutions performed better than the broader S&P 500 in December and for the full year 2018. Secondly, safe haven assets such as fixed income continued to provide stable returns, and gold had an incredibly strong month, returning around 5%.
Though heightened volatility has concerned many investors, it is important to keep in mind that at the current juncture, we have a backdrop of a strong U.S. economy and continued job growth. We continue to stress focusing on long-term wealth growth and not being reactive to short-term swings in markets.
December 2018 Model Portfolio Returns
Source: Reuters Eikon as of December 30 2018. Please note that performance shown are for Wahed model portfolios. Actual client performance will depend on the timing of funding and intra-quarter drift from targets. Past performance is not indicative of future results