Sunday, December 31, 2017

A Banner Year

2017 was a banner year.  Stocks were up.  Bonds were up.  Commodities were up.  It was a very good year indeed!

The largest company stocks did best, with the Dow rising 28.11 percent.  (Your portfolio probably didn't rise nearly that much, unless you invested solely in the Dow without diversifying or invested very heavily in technology.)  The merely huge companies in the S&P 500 index rose 21.83 percent, while middle size companies rose 16.24 percent and smaller companies rose a "mere" 13.23 percent. 

This out-performance by the largest companies reflected the fact that most are multinational and benefited from the economic recovery around the world.  In addition, investors believed the multinationals would get a tax break on repatriating their cash from abroad, which they did with the new Republican tax plan.

The improving economy outside the U.S. should not be ignored.  European stocks were up 26.18 percent, while Asian stocks were up a whopping 45.06 percent.  Even Latin America stopped limping along and rose 26.93 percent (although it stumbled some in the fourth quarter).  This non-U.S. growth is one of the strongest fundamentals of our current U.S. stock market.  Pundits call it a "synchronous global recovery."

Increasing profits and decreasing taxes during a global recovery is the secret potion for a good 2018.