There’s an old Chinese proverb, “May you live in interesting times.” If this is your goal, you have succeeded wildly in December. We saw the largest one-week decline in a decade, and we experienced the highest one-day point rally in nearly as long. The market performance in December was certainly unique; it wasn't a risk-off trade where everything went down, and the greater the risk, the greater the decline. Rather, things like international stocks declined at about half the rate of U.S. stocks of comparable size, while emerging markets declined at a third of that rate. We did see some positives too, as U.S. fixed income did well for the month, and the Federal Reserve signaled that the expected rate increases for 2019 will likely be less than anticipated.
There was a lot of concern over political issues, but the underlying fundamentals were quite compelling. The average hourly earnings rose 3.2% in the final month of 2018 – giving us the biggest full-year gain since the beginning of the expansion. We saw wage growth in areas that you would expect, like information technology, which saw the largest increase the industry has experienced in the last nine years. Areas like construction and retail trade are spreading the wealth, not just to the top income earners but to laborers as well, and also saw a greater wage growth in 2018 than we've seen in the last nine years – all of which was encouraging.
On a prospective basis, there are a number of things to be concerned with as we move into 2019, but there are also a number of things to look at with promise. During December, stock valuations – what stockholders were paying for $1 of earnings – fell to five-year lows, which can be viewed as a positive because it indicates that stocks are fairly priced, and we are not experiencing a bubble. In addition, other areas of the global market held up better, plus there was wage growth across the board. Employment participation, or the actual percentage of people working, is also on the rise, currently above its long-term historical average and sitting at one of the highest levels we've seen in several years. So far in January, we've continued to see a bounce back from that bottom. As we continue to analyze the data, there are things to be concerned about, however there are also things to be optimistic about. We are definitely living in interesting times.