Market Beat: A look back at 2017 markets
January 2, 2018
The markets performed fairly well last year. Economic growth was strong, the unemployment rate remained low, and corporate earnings were good.
U.S. stocks had a good year; the S&P 500 had a gain of 19.42 percent, which made it the best year since 2013. The Dow Jones Industrial Average, which is comprised of just 30 stocks, posted a rise of 25.08 percent.
The best performing stock in the Dow was aircraft manufacturer Boeing, which gained 89.4 percent. The tech heavy NASDAQ recorded a gain of 28.24 percent. The Information Technology Sector reported good earnings growth over the year. The small cap Russell 2000 Index gained 13.14 percent.
Foreign markets did pretty well, too. The ETF that represents the Europe Asia and Far East Index, the EAFE symbol EFA was up 25.10 percent. The emerging markets ETF, symbol EEM was up 37.28 percent.
2018 should be an interesting year. The U.S. stock market is fully valued as the PE or price to earnings ratio is above both the five- and 10-year average. The outlook for corporate earnings growth is good.
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European stocks had an average year overall. The British FTSE 100 was up 7.63 percent. The German DAX had a gain of 12.51 percent.
Asian equities had a good year, too, the Asia Dow was up 25.24 percent. The Nikkei 225 Index was up 19.10 percent and the Hang Seng had a gain of 35.99 percent.
Commodities had a pretty good year in 2017 also. The S&P World Commodities Index posted a 15.24 percent rise. Precious metals rose last year as gold gained 11.65 percent. The Energy Sector lead S&P earnings growth last year as oil rebounded and crude oil was up 5.61 percent.
Globally, bonds performed well as many countries are still practicing stimulative monetary policies. Barclays Global Aggregate Bond Index was up 7.63 percent. In the U.S., bonds did not perform as well as the Federal Reserve raised the Fed funds rate and began a policy of quantitative tightening. The U.S. Treasury Core Bond Index was up 0.46 percent for the year. The yield on the benchmark ten year U.S. Treasury bond closed the year at 2.41 percent.
2018 should be an interesting year. The U.S. stock market is fully valued as the PE or price to earnings ratio is above both the five- and 10-year average.
The outlook for corporate earnings growth is good. The new corporate tax rate will take effect and that should allow for more funds to be repatriated from overseas for stock buybacks and dividend increases.
As always there will be risks to look out for, too. There are plenty of geopolitical risks and there is always the possibility that the Fed will over tighten and slow the economy.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.
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