Year in review – how investment returns played out in 2018

Shaun Port

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Sometimes in investing, very few assets deliver returns over the course of a year. This is not common, but it does happen from time to time. 2018 was one of those years.

2018 year in review

The value of world equity markets fell by $6.55 trillion over the year1. This is equivalent to roughly 8% of the size of the global economy, and the largest fall in equity values since 2008. Global bond values rose only very modestly, by $0.27 trillion2.

The story behind a tough year

Overall, global equity markets had a torrid year, falling by 11.8%3. Including dividends, the net return was -10.1% – the eighth worst year for equities since 1970.

In developed markets, the median return across 23 countries was -9.6% in local currency, whereas in emerging markets the median return was -14.5% in US dollars.

Only two developed markets produced positive returns last year – New Zealand (+6.0%) and Israel (+0.8%). Together, these two markets account for just 0.3% of global equity market capitalisation.  In emerging markets, no country delivered a positive return in US dollars, although Brazil did return 15.6% in local currency.

2018 equity market total returns, by country


Looking at the UK, large company share prices (FTSE 100) fell by 12.5%, but dividends helped reduce this to 8.8% net loss. The share prices of small and mid-sized companies (FTSE 250) declined by 15.6%, or 13.3% net of dividends. While there was an impact from Brexit risk, the UK market didn’t perform too badly, helped by a weaker pound, outperforming continental European and Japanese equities by some margin.

What was also noticeable was that small companies did particularly badly across most regions – typically around 4-5% worse than large companies.

Broad commodities lost 11.2%, while gold was down 1.5%.

Bonds disappointed as well, given that government bonds should perform well in a poor environment for stock markets. US treasuries returned just +0.8% (on 8th November, the return for the year was at -2.6%) while UK gilts returned +0.5% (-3.3% for the year on 10th October).

UK corporate bonds lost 1.6%, somewhat better than US corporate bonds (-2.2%). A 50/50 portfolio of local equities and local corporate bonds lost 4.0% in the US, 5.5% in the UK and 6.2% in Europe, before fees. In the US, losses of this magnitude were last seen in 2008 and 2002, and before that in 1974. For UK assets, this happened in 2008, 2002, 2001, 1994 and 1990. So overall, losses like this aren’t that common.


The two, and only two, stand-out performers in 2018 were the US dollar (up 4.4%) and US dollar cash (returning 2.0%). So, not much of an investment strategy, more like sitting it out on the sidelines. In a year when US companies delivered 24% growth in earnings, this would have been a very odd strategy.

The outlook

It’s clear that 2018 was certainly not a year to savour for investors. But, short of a global recession happening in 2019, we believe returns this year will be much brighter.


  1. MSCI AC World IMI Index
  2. Based on Bloomberg Barclays Global Aggregate and Global High Yield Indices market value
  3. MSCI AC World IMI in US dollars

Performance data: Bloomberg and Macrobond

Risk warning

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past performance and forecasts are not reliable indicators of future performance.


Shaun Port
Shaun is the chief investment officer at Nutmeg. He has over 25 years’ experience developing and implementing investment strategies for clients ranging from central banks to pension schemes to charities and private individuals. Shaun holds a degree in Mathematical Economics from the University of Birmingham and is a Chartered Alternative Investment Analyst. He can be found tweeting @ShaunPort.

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