Eye On The Markets

Special Update: 2017 in Review

 

Markets: Flat finish, but a banner year

Weekly market view from LMK Wealth Management. Reprinted with permission. Visit www.lmkwealth.com

In the final trading days of a strong 2017, U.S. indexes lost some ground. During the holiday-shortened week, the S&P 500 dropped by 0.36%, the Dow lost 0.14%, and the NASDAQ gave back 0.81%.[1]

A selloff toward the end of the day on Friday contributed to the domestic indexes’ weekly losses.[2] International stocks in the MSCI EAFE ended the week in positive territory, gaining 0.89%.[3]

Despite the losses, all three major domestic indexes experienced their best year since 2013.[4] During 2017, the Dow hit 71 record highs, and the NASDAQ gained in all but 1 month for the first time ever.[5]

Overall, indexes posted the following growth for the year:

  • S&P 500 up 19.42%[6]
  • Dow up 25.08%[7]
  • NASDAQ up 28.24%[8]
  • MSCI EAFE up 21.78%[9]

Very Little Volatility

In addition to sizeable gains, there was also very little market volatility in 2017. The S&P 500 only had 8 days when it lost or gained 1% or more. In 2016, the index had 48 days with at least 1% movement, and 2015 had 71 such days.[10]

With high growth and low volatility, it’s little wonder that consumer confidence has reached its highest levels in 17 years. However, considering we are almost 9 years into this historic bull market, can the growth continue?[11] Let’s take a look at a few economic indicators to examine where we are and what might be on the horizon.

Economic Highlights

Gross Domestic Product
 Economic growth picked up in the 2nd and 3rd quarters, and analysts believe the expansion could continue in 2018.[12]

Labor
The unemployment rate dropped to 4.1% by October 2017, and some analysts believe it could fall even more in 2018.[13]

Inflation
While inflation is below the Federal Reserve’s 2% goal, the most recent readings show a healthy increase. If inflation continues on this path, the Fed will likely continue to slowly increase interest rates in 2018.[14]

Tax Changes in 2018

Many people are wondering how the new tax plan will affect markets and the economy in 2018.

On January 1, a number of changes went into effect, including new tax brackets for citizens and a permanent tax rate reduction for corporations.[15] As a result, this law may impact both economic performance and your individual bottom line.

If you have any questions about how to prepare for what lies ahead – or want more details on what we expect in 2018 – contact us any time.

Economic Calendar

– Monday: Markets Closed for New Year’s Day

– Tuesday: PMI Manufacturing Index

– Wednesday: Motor Vehicle Sales, ISM Mfg Index, Construction Spending

– Thursday: ADP Employment Report, Jobless Claims

– Friday: Employment Situation, Factory Orders, ISM Non-Mfg Index

 

 

[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/[email protected]
[2] www.cnbc.com/2017/12/29/us-stocks-open-higher-sp-500-tracking-for-best-year-since-2013.html
[3] www.msci.com/end-of-day-data-search
[4] money.cnn.com/2017/12/29/investing/stocks-2017-wall-street/index.html
[5] www.cnbc.com/2017/12/29/us-stocks-open-higher-sp-500-tracking-for-best-year-since-2013.html
[6] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
[7] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US
[8] http://performance.morningstar.com/Performance/index-c/[email protected]
[9] www.msci.com/end-of-day-data-search
[10] www.cnbc.com/2017/12/29/us-stocks-open-higher-sp-500-tracking-for-best-year-since-2013.html
[11] money.cnn.com/2017/12/29/investing/stocks-2017-wall-street/index.html
[12] www.cnbc.com/2017/12/21/us-final-reading-on-q3-2017-gdp.html
[13] data.bls.gov/timeseries/LNS14000000
www.thebalance.com/us-economic-outlook-3305669
[14] www.bloomberg.com/news/articles/2017-12-22/u-s-consumer-spending-tops-forecasts-as-inflation-accelerates
[15] www.cnbc.com/2017/12/28/tax-changes-are-coming-monday-heres-when-it-will-affect-you.html