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4th Quarter 2018 in Review

What a month, what a quarter, what a year! It almost feels like the whole year was summed up in the month of December. The Russell 1000 Index* was down 9.11% for the month and 13.82% for the quarter. The smaller stocks of the Russell 2000 Index* were down more, 11.88% and 20.20%, respectively. These losses wiped out any gains for the year and took the market from record highs to negative returns in a short period of time.

In our last letter we said, “Momentum is currently carrying the day, but when it shifts we can expect the market to take a radical turn toward more conservative tactics.” This was certainly the case last quarter as Utility stocks were the only sector to advance. The previous winner, Technology, helped lead the way lower with prices falling 17.3%. Bonds did offset this volatility to some extent.

Market Outlook

Where are we now? Sentiment has turned morose with most investors now firmly in the bearish camp. A review of eight of our key sentiment indicators points to seven of them being favorable and only one negative. This is usually a good sign for a reversal in the market. We have recently seen a level of capitulation which contrarians consider a good opportunity to do some buying.

We may have not hit the ultimate bottom, but we believe this is a much better time to buy than a mere three months ago. We have also seen value oriented stocks start to show some better results, but they too have fallen. We believe we are in a transition period, away from the growth dynamic which dominated for over a decade, to a more conservative, value oriented approach. As we look to the future, we believe 2019 will see the internet mania fade and in its place a return to logical value oriented investing. We think this could last a long time and be very beneficial for an active approach to investing.

We wish you a Happy New Year, and believe great opportunities are coming.


*The Russell 1000 Index is an index of approximately 1,000 of the largest companies in the U.S. equity market. Russell 2000 Index is an index measuring the performance approximately 2,000 small-cap companies in the Russell 3000 Index. One cannot invest directly in an index.

Opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
Market Update December 2018 
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Market Update September 2018 
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Market Update June 2018 
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Market Update March 2018 
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James Economic Outlook 2018  
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Market Update December 2017 
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Market Update September 2017 
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Market Update June 2017 
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Market Update March 2017 
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Market Update December 2016 
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Market Update September 2016 
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Market Update June 2016 
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Market Update March 2016 
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Market Update September 2015 
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Market Update June 2015 
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Market Update March 2015 
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Market Update December 2014 
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Market Update September 2014 
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Market Update June 2014 
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Market Update March 2014 
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Market Update September 2013 
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Market Update March 2013 
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Market Update December 2012 
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James Economic Outlook 2013 
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Market Update September 2012 
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Why Own Bonds? March 2012 
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Market Update December 2011 
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Market Volatility August 2011 
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How to Offset Inflation May 2011 
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Market Update September 2011 
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No American Default July 2011 
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Economic Slowdown June 2011 
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Topping Markets January 2010 
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New Stimulus Won't Cure Economic Woes July 2009 
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Rally at Hand December 2008 
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Weathering the Storm
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Buy Stocks Mar 2008
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Further Declines Ahead July 2007 
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James Economic Outlook 2012 
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James Economic Outlook 2011
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James Economic Outlook 2009
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James Economic Outlook 2008
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James Economic Outlook 2007 
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James Economic Outlook 2006 
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James Economic Outlook 2005 
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James Economic Outlook 2004 
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James Economic Outlook 2003 
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