2018 got off to a flying start, with U.S. equities delivering their best January since 1989. While that price surge is surely impressive, it is not unprecedented. Since 1950, there have been 20 instances where the S&P 500 began the year with a price return above 4%. Lessons to draw from history are that: (1) after such a strong start, February returns are typically much more modest, yet generally positive; (2) in all cases, the index finished the year in positive territory, with an average price return of 22.4%; and (3) we should brace for a volatility comeback, with an average intra-year drawdown of 10% (chart 1). The most notable example is 1987, in which despite crashing 33.5% from peak to trough, the S&P 500 managed to finish the year positively along with economic growth.
** I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial **