No one made money in 2018, but the bad news may be priced in.

The past 12 months have no doubt been difficult for investors, with cash outperforming both bonds and equities for the first time since 1993. To add some further perspective, a whopping 89 per cent of assets handed investors losses in 2018, more than any year going back to 1901, according to Bloomberg.

That means even the pros had trouble finding places to generate positive returns.

It also certainly didn’t help that the Grinch Stole Christmas with one of the worst Decembers on record for equities — at least since the year Raging Bull, the Empire Strikes Back and Caddyshack were released.

That said, there are times when risks are priced in to the market and times when they aren’t.

At this point, given what we are witnessing, we believe the risks of a global economic downturn are quickly being factored into equity market valuations.

For example, the drop in the valuation of the S&P 500 is the third-biggest since 1991, according to Bloomberg.

Yardeni Research has noted that the S&P 500’s PEG ratio also hasn’t been this low since the 1990s — with the exception of the 2008 financial crisis and the 2011 sovereign debt crisis.

Looking abroad, The Wall Street Journal, citing Factset’s World stock index, has noted that the forward price-to-earnings ratio for global stocks has now reached five-year lows at just above 13 times, down nearly 20 per cent from the level at the beginning of 2018.

For those looking for a turning point, we suggest focusing on the central bankers, who can only ignore the inverted yield curves for so long. In our opinion, many, including our own Bank of Canada, will be forced to react to rapidly shrinking liquidity in markets by toning down their hawkish outlooks for interest-rate hikes.

We would also point out that our federal government has an affinity for running deficits even during periods of economic strength — imagine what they will do if our economic growth grinds to a halt, or worse, contracts. It also doesn’t hurt that 2019 is an election year.

Looking into next year, we’re taking a glass-is-halffull approach, as we think many are underestimating the growth stimulus coming from much cheaper oil prices and strong retail sales, something that comes as corporate earnings growth remains at very robust levels, even if it is contracting a bit.

We are also witnessing some very attractive dividend yields — as high as five to six per cent — supported by strong balance sheets. As yields compress upon the expectation for moderating interest rates, these stocks could offer the potential for capital appreciation as well.

Finally, while we think that most portfolios will eventually benefit from these positive developments, it’s important to remember that there are those who may not make it out of an economic downturn unscathed.

That is especially true in Alberta, which is being hammered by weak oil prices and a made-in-canada energy crisis and for those in Ontario affected by the decline of auto manufacturing.

With that in mind, it’s important to give that little bit extra this season, whether it be in the form of time or from the pocketbook, to make sure nobody’s glass is empty.

Martin Pelletier, CFA is a Portfolio Manager and OCIO at Trivest Wealth Counsel Ltd, a Calgary-based private client and institutional investment firm specializing in discretionary risk-managed portfolios as well as investment audit and oversight services.