News & Events

Annual Review & Outlook


We are not in the business of making economic predictions. However, that won’t stop us from doing so now. But first, let’s take a look back at 2018.

Many of our 2018 predictions held up well until the last 3 months of the year. This is when a host of malevolent factors converged and pricing for risk assets disintegrated. While we are not pleased where many prices finished the year, there does not appear to be anything fundamentally wrong with the economy or the businesses in which we have chosen to invest. Since we have started the year with lower prices, we are excited about the prospects for a more constructive year for total returns in 2019.

Our predictions for 2018 with follow-up commentary.

·         Global GDP continues to expand at an increasing rate (3%+), led by developing and emerging markets – Initial global GDP growth looks to come in around 5+% & US GDP at 3%; Asia (ex-Japan) is leading the growth but lower than forecasted levels. +

·         Equity returns from Asia and Europe (+12%) will top those from the US (+8%) – Missed on both fronts; US stocks dropped 5.2% and foreign stocks declined 16.4%. x

·         Secondary and tertiary issues (small and mid-cap companies) will provide stronger returns than bellwether large- cap companies – A miss, with the Russell 1000 down 4.2% and the smaller company index declined 11.0%. x

·         We see a significant upturn in the number of companies going public, a sign of healthy markets – There was a 33% increase in the number of IPOs representing. +

·         Volatility increases, however, remains well below historical averages – Direction correct, but a miss on the magnitude at year-end. + x

·         Technological innovation drives productivity gains keeping inflation in check – Inflation remains subdued; however, it is difficult to give full credit to any one factor, technology is thriving. +

·         The US Dollar loses ground against other developed and emerging currencies – The dollar appreciated 4.4% against a basket of major world currencies. x

·         Emerging market debt provides greater returns than US government and corporate bonds – The Barclays US Aggregate Bond Index returned .01% while a JP Morgan Emerging Market Bond Index declined 4.6%. x

·         US Bonds produce zero return, cash from interest payments make up for the decline in prices – Since .01% rounds to zero, we win both showcases in the Price is Right. +

·         Crypto currencies remain volatile with Ethereum and Ripple replacing Bitcoin as market proxies – If a decline in value of 74% equates to volatility, we were spot on. However, Bitcoin remains the posterchild for crypto assets in the market. + x

·         Governments from around the world increase regulation on ‘digital’ currencies – It is coming and we believe it contributed to some of the decline in value over the past year. +

·         Energy prices climb 15%, oil to a range high of $70 Barrel, Natural Gas to $3.30 – Oil averaged $65 for the year while peaking at $76, Natural Gas ended where it started and averaged $3.04. +

·         Demand for lithium continues to grow with continued adoption globally of electric vehicles – The US Geological Survey that tracks and reports the global production of lithium has not released its latest numbers due to the government shutdown. Stay tuned…

·         With favorable demographics, both single and multifamily housing continues to perform well – According to Zillow, single family homes increased 7.7% and Freddie Mac reports an 11.3 increase for buildings with 5 or more units. +


The Minnesota Vikings make it to the Super Bowl, but not sure if they will be on the field or in the stands – There is always next year.

Our predictions for 2019 are as follows:

·         Global growth of GDP remains stable (Growing at ~5%) however the US slows to 2%

·         Equity returns from Asia and Europe (+14%) will top those from the US (+10%)

·         Inflation does not accelerate and remains below 2.1%

·         The US Dollar loses ground against other developed and emerging currencies

·         Emerging market debt provides greater returns than US government and corporate bonds

·         US Bonds produce marginally positive returns

·         The FOMC raises rates once at its December meeting

·         Crypto currencies stabilize with Bitcoin appreciating 8%

·         Amazon and Berkshire Hathaway will both announce large acquisitions

·         Energy prices climb, oil ends the year at $58 while peaking at $68

·         No category 3 or stronger hurricanes hit the United States, but record year for tornados

·         After 2 months, politicians compromise, and the government goes back to work: Trump gets his ‘Wall’ and there is partial immigration reform

·         The UK undertakes another vote and cancels BREXIT

·         Mike Pence is still VP in a year

We finished 2018 with a score of 8 for 13. We’ll see if we can improve upon this in the upcoming year.

Daniel Aronson, CFA                       Bruce Langer, CFA                           Ben Frey, CTP

Ben Frey