• Dr. Anna

Performance is Relative

As of 12/31/2018, the Dow Jones Industrial Average (DJIA) fell by 5.63% on a year-to-date basis according to Likewise, as of 12/31/2018, the S&P 500 fell 6.24% on a year-to-date basis. As the story of the 2018 stock market concluded as of the end of business on 12/31/2018, the established trend for the year decidedly pointed to a retrenchment and pull back. The precipitous decline in prices could be attributed to US China trade talks, weak oil, Federal Reserve interest rate hikes or an overall weakening in global economic growth. The reason for the drop could be a combination of all factors or weighted in various combinations. Decomposing the market’s movement in 2018, certain facts emerge upon closer examination.

In contrast to the overall market trend in 2018, some security prices rose on a year-to-date basis in 2018. After selecting a group of strong companies, an examination of year-to-date individual performance indicated year-to-date price increases for Amazon (AMZN), Tesla (TSLA), Microsoft (MSFT), Berkshire Hathaway Inc. Class A (BRK.A) , Berkshire Hathaway Inc. Class B (BRK.B) and Sony Corporation (SNE). Excluded from this special group and reporting a cumulative year-to-date stock price decline are Facebook, (FB), Alphabet Class A (GOOGL), Alphabet Class C (GOOG) and Caterpillar Inc. (CAT). Microanalysis of individual companies would be helpful for investors and analysts in this market since financial theory reflects the expectation that current prices reflect the company’s expected future cash flows and clearly expectations differ for the two sets of companies cited here.