What a year we had in 2017! It was a good year for investors, with strong market returns and surprisingly low volatility considering the political landscape. The economy continued to strengthen even as natural disasters ravaged our country and geopolitical tensions rose. Let’s look a little closer at everything that happened:
Stock Market
The bull market charged on with all major indices setting new records. The S&P 500 rose 19.42% (1) between the opening bell on January 3 and the close of December 30, the last trading day of the year. On November 24, it closed above 2,600 for the first time ever. (2)
Many people were also astounded by the lack of volatility in the markets all year long. The CBOE’s volatility index was at record lows, near half the historic average. (3) The lack of volatility coupled with stellar returns left many investors smiling.
American stocks aren’t the only ones that had an impressive year, though. The MSCI World Index went up 22.4% (4) in 2017, the first year ever to see gains every single month. This global success has been driven by earnings growth and the fact that the world’s 45 largest economies are all experiencing growth right now. (5)
US Economy
Speaking of economic growth, the US saw their fair share of that as well. The year got off to a slower start, but by the second quarter GDP was growing around 3% and continued to do so for the rest of the year.
Like the rest of the world, we saw earnings growth that surpassed analysts’ expectations. Business confidence was high as the new presidential administration began to strip away regulations. Consumer confidence was high as well, as wages grew and the job market remained tight. Unemployment dropped from 4.8% at the beginning of the year to 4.1% in December. (6) It hasn’t been that low in 17 years. (7)
Federal Reserve
The Fed raised rates three times in 2017, bringing the target rate range to 1.25% - 1.5% in December. They were spurred on by the growing economy and tight labor market. However, they remain concerned that inflation is not rising to their target rate of 2%. In February, Fed chair Janet Yellen will pass on her responsibilities to Jerome Powell, who is expected to continue taking things in the same direction. (8)
Tax Reform
One of the major things to come out of 2017 was the passage of a major tax reform bill in December. While many Americans expect to see their tax bills lowered in 2018, the biggest impact on the economy will come from slashing the corporate rate from 35% to 21%. This will have an immediate impact on earnings and could also affect wages and capital investments as well.
What’s On The Horizon For 2018?
Coming off of a remarkable year, most economic indicators are pointing in the same direction for 2018. The tax reform should only serve to boost our growing economy even more. We are already seeing signs of a positive year ahead, as the S&P 500 has already closed above 2,700 on January 3.
While I don’t expect a recession in 2018, there could be a market correction or pullback. The economy is strong, but a terrorist attack, natural disaster, or nuclear attack could easily put a damper on things.
If you have any concerns as we head into the new year, give me a call at 770-800-2851 or email me at kevin.myers@atl-ga.net. If you’re looking for an experienced financial advisor to work with, click here to book your free introductory meeting where we can get to know each other to see if we would make a good team in realizing your financial dreams.
About Kevin
Kevin Myers is a financial advisor and managing partner at ATL Global Advisors, an independent financial services firm serving transportation and logistics employees in the greater Atlanta area. With more than two decades of industry experience, he specializes in providing private wealth management services to business owners and their families, with the goal of helping them realize their financial dreams. Learn more by connecting with Kevin on LinkedIn.
Important Dislcosures: Investors cannot invest directly in indexes. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability, and differences in accounting standards. The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
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(1) https://dqydj.com/2017-sp-500-return/
(2) https://en.wikipedia.org/wiki/Closing_milestones_of_the_S%26P_500
(3) https://www.marketwatch.com/story/heres-where-stock-market-volatility-is-lurking-2017-11-24
(4) https://www.msci.com/documents/10199/149ed7bc-316e-4b4c-8ea4-43fcb5bd6523
(5) https://www.schwab.com/resource-center/insights/content/market-perspective
(6) http://www.ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx
(7) https://tradingeconomics.com/united-states/unemployment-rate
(8) https://www.forbes.com/sites/laurengensler/2017/12/13/federal-reserve-raises-interest-rates-for-third-time-in-2017/#1cbd8f557a53