GS Goldman Sachs Group Inc

Investors found few places to hide in 2018 as financial markets from stocks to oil to Treasury bonds retreated.

While global markets rallied at the start of the year, buoyed by optimism about the economy, investors' sentiment quickly soured as stocks tumbled in February. Heated trade rhetoric between the U.S. and China, fears about rising interest rates and doubts about global growth dragged shares lower from New York to Shanghai.

To make things worse, many of the technology behemoths that had soared in 2017 suffered a tumultuous retreat -- one that left investors scrambling to figure out whether the dips were temporary or the start of a more enduring pullback from fast-growing companies that have looked increasingly pricey as the bull market aged.

Stocks closed out October with their worst monthly performance in years, with the S&P 500 tumbling its most since 2011 and the Nasdaq Composite logging its biggest monthly decline since 2008. Apple Inc., whose market capitalization vaulted above $1 trillion market in August, gave up that title as a fall rout in stocks deepened.

Investors briefly enjoyed a reprieve in late November. Federal Reserve Chairman Jerome Powell said interest rates looked like they were "just below" the neutral level, a remark that many interpreted as meaning the central bank could raise interest rates more slowly than expected. That helped ease the fears of investors who throughout the year worried that rising rates could stymie the economy and diminish the allure of stocks.

But investors' relief gave way to anxiety in December as the U.S. and China returned to the negotiating table. Although the two countries notched a temporary trade truce at the Group of 20 summit, analysts cautioned that the deal could fall apart. A worsening of trade relations could pressure corporate earnings growth at a time when many already believe it will decelerate.

All three major U.S. stock indexes are on track to end the year lower for the first time since 2008. Crude oil is down 17%, while the yield on the benchmark 10-year U.S. Treasury note is poised for its biggest one-year rise since 2013. Bond prices fall as yields rise.

Few investors are ready to call it quits altogether. Corporate profits are still strong, interest rates remain relatively low and the U.S. economy is continuing to grow -- though at a slower pace.

Still, many say it is increasingly difficult to identify winners across the markets. That has analysts from Morgan Stanley to Stifel projecting that U.S. stocks will produce single-digit percentage returns next year, a steep slide from the heydays of the bull market.

Akane Otani

Fund Prices Hit New Low: Zero

Fidelity Investments in August scored a coup by rolling out a product that is a lure to cost-conscious investors but hard for smaller rivals to match: the no-fee index fund.

The development highlights the increasingly contentious economics of the asset-management industry, which after years of strong growth and improving profits now finds itself in the grip of a deepening price war.

Fidelity's four new zero-fee funds held $2.4 billion in investor money by November, the company said. After that, rival Vanguard Group reduced to $3,000 from $10,000 the amount customers must invest to get lower-fee shares in more than three dozen index funds.

The moves portend hard times ahead for many asset managers, after a year characterized by weakening share prices and softening investor inflows.

The largest investment firms, including Fidelity, Vanguard and BlackRock Inc., have been moving to undercut rivals by lowering the fees customers pay to invest in funds that mirror broad markets. Several companies look to use these low-cost products as a come-on to gain new customers they can later lure into investments that yield higher fees.

But many smaller investment firms, analysts and investors warn, won't be able to keep up.

Dawn Lim

Challenges Await New Goldman Sachs Chief

Lloyd Blankfein retired Oct. 1, ending a nearly 13-year run atop Goldman Sachs Group Inc. and leaving James Dimon of JPMorgan Chase & Co. as the last major Wall Street CEO from before the financial crisis.

Mr. Blankfein, who often joked he planned to die at his desk, hands successor David Solomon the reins of a firm at a crossroads. Goldman remains widely admired as smart and organized, but has started relying more on unproven lines of business and faces fresh challenges to its reputation after the revelations of its involvement in Malaysia's 1MDB scandal.

Mr. Blankfein steered Goldman through the crisis and left it in better shape than many rivals. He spent years afterward rehabilitating its image. The public-relations barrage culminated in the firm's recent entry into new businesses like retail banking.

Yet his record is mixed. Goldman's shares during Mr. Blankfein's watch lagged behind the broader market, returning 77% to the S&P 500's 203%, and trailed many U.S. banks. Mr. Blankfein also was slow to diversify Goldman beyond its trading and deal-making legacy, leaving much of the work of building a more-balanced firm to his successor. Goldman is just now pushing into credit cards, commercial payments and other businesses.

Liz Hoffman

In Brief

Bitcoin, formerly one of the hottest investments, lost about three-quarters of its value as investors rethought the cryptocurrency's future. After rising 1,375% in 2017, bitcoin slid from above $14,000 at the start of January to below $4,000 as speculators looked elsewhere and questions grew about how widely bitcoin will be adopted.

Crude-oil prices have fallen 17% in 2018. U.S. crude had rallied to an almost four-year high above $75 a barrel in early October, but a quick surge in supply, unexpected waivers on Iran sanctions and crumbling confidence in global growth sent prices into a tailspin in the fourth quarter. By mid-December, U.S. crude futures had tumbled below $50, providing some relief to drivers but pain to the shale-drilling industry.

Copper prices are on track to fall for the fourth quarter in a row, their longest quarterly losing streak since 2015, as the U.S.-China trade battle drags on. China is the world's biggest consumer of the metal, widely used in construction. The trade dispute has sent prices about 15% lower in 2018 so far.

Wells Fargo followed a tough 2017 with another difficult year as the bank continues to deal with fallout from a sales-practices scandal. It is under an unprecedented asset cap from the Federal Reserve and recently paid a $1 billion fine to two of its main regulators. Units throughout the bank remain under federal and state investigations, including wealth management and foreign exchange.

Hedge funds struggled to justify their fees , with some deciding to return money to clients. As stock hedge funds on average trailed the S&P 500, funds including Tourbillion Capital and Highfields Capital said they would either close or send cash back to customers.

(END) Dow Jones Newswires

December 18, 2018 12:50 ET (17:50 GMT)

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