Hi folks, there are a lot of ways from an investment standpoint to evaluate 2017. According to Callan’s Periodic table, here are just a peek at some of the results. For 2017, the S&P 500 earned 21.8 %; the MSCI World Index (excluding the US) turned in a 24.21% number for the year; the Russell 2000 (a small company index) registered at 14.65 %. If you favored the growth tilting version of the Russell 2000, you were rewarded handsomely with a 22.17% return for the year. How could I forget the technology-rich NASDAQ composite, among equities that delivered a whopping 29.6% return? Even the Barclays Aggregate Bond Index Return posted 3.54% while Barclay’s High Yield Index came through with stout 7.5% for the same period. On top of the great performance, the markets were relatively calm for the year despite the usual dollops of troublesome news.
It seems the new Tax Law of the land has touched the generosity nerve in many Corporate CEOs as we witness some very generous bonuses being awarded in public to a fairly wide swath of employees. Sorting out how much of the corporate tax savings will be reinvested in plant and equipment will be evident in the next several quarters. My prediction is that consumers, aside from increasing savings and making tuition payments, will contribute to some positive impact on retailing and housing as well.
This all sounds like a perfect sunny summer day at the beach with gently rolling waves, 78-80 degrees F with no humidity.
What could stop the party? The FED could certainly accelerate the number and amount of interest rate increases if they felt the enthusiasm for the market was continuing without supporting earnings growth to validate it. Washington and it’s chief legislators could stay so dug into their respective mantras that we fail to tackle some issues (like smart immigration) that could leave our companies starving for trained employees to fill the ranks. If we don’t address the qualified training issue for workers, we will be ceding the product demand to China where the working-age population is plentiful and factory capacity is expanding at a rapid pace.
Geopolitical issues still exist and it seems like that will continue under a Trump Presidential office.
In 2018, we are likely to see continued growth for the first several quarters. However, the surges in earnings in some segments will not match their 2017 counterparts. More detail to follow… Below is some more detail on the new tax rates & schedules for 2018 from Putnam, who has made this big concept fairly easy to comprehend on a personal basis.
Best Regards, David