This past week saw Wall Street finish up its worst trading year since the end of the Global Financial Crisis. All of the significant stock indices recorded their worst annual performances going back to 2009. The S&P 500 declined seven percent for the year.
It was not just the indices taking a beating either. Legendary hedge fund managing all-star (and billionaire investor) David Einhorn suffered by far and away his worst year. His primary Greenlight Capital fund suffered a dramatic 34 percent decline for 2018, of which nine percent of it came for December alone. These are easily the most abysmal results for Einhorn since he founded the investment vehicle back in 1996.
Anyone who thought the New Year 2019 would suddenly alter course to start off with a pop higher was proven wrong today when American stocks plunged drastically with disappointing economic results pouring in from across the globe. The DJIA crashed 288 points on the open for a 1.2 percent decline so far. It was a broad-based decline with industrials and techs both tanking. The Nasdaq Composite was down over 1.4 percent with Google, Apple, Amazon, and Netflix all in decline.
It is hard to believe that only a year ago the beloved FAANG stocks of Facebook, Apple, Amazon, Netflix, and Google were the darlings of the equities world. For 2017, fully four out of the five tech behemoths had increased in share price by around 50 percent. Apple had just come off of its greatest year dating back to 2010. Facebook had finished its finest year back to 2013.
The tech giants suffered from a persistent problem that has only just begun for them in increased demands for regulations of their core business models, thanks to Internet privacy scandals. The trade war with China set a negative tone for the markets in general, opening the door to taking money off the table with the highest running tech company stocks.
After this, it all became a self-perpetuating vicious cycle decline. FB itself finished 2018 down an eye-watering 25 percent, significantly into bear market stock territory. This was dramatic enough to win the award for worst year of Facebook stock trading, its one negative trading year since the firm IPO’ed back in 2012. Just look at this chart and you will quickly get the idea:
Yet despite an abysmal performance for the FAANGs in 2018, this may not be the worst of it yet. Facebook still suffers from a public relations nightmare over scandals that have destroyed its once-white knight image. The social media kingpin still has to answer hard questions from the stern regulatory body the FTC as well as fight off continuing attempts to steal its market share and user base for the new year 2019.
Apple continues to struggle in competing against its own past stellar performances. Netflix is still hemorrhaging money and borrowing like there is no tomorrow, forever hopelessly ruining its own current and future balance sheets. Whichever angle you pick for the tech stock majors, things are not looking good.
Is Your Retirement Portfolio Prepared for the Real De-FAANGing of the Stock Market?
Markets can not go up forever, and all good things finally come to an end. The real question now is whether or not the markets will manage to walk away with their pride still intact. An increasing number of respected analysts (including Todd Horrowitz) are calling for a worse 2019 than 2018 as the bear market really gets underway. This is not the time to buy the dips and become a victim of the famed sucker’s rally or a dead cat bounce (as even a dead cat bounces when it is thrown out the window).
The best time to cash out of the high-flying tech stocks is now long past. Hoping that they will somehow magically make a huge comeback with markets just beginning to contemplate more historically normal valuations will likely only cost you still more sleep at night. Fortunately, there is no reason for you to suffer through the same mistakes in waiting too late to insure your retirement portfolio. Gold is the only single asset class that offers you more than three thousand years in value-hedging capabilities anywhere on earth. Ignore its capital preserving power at your own peril.
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