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%. A selloff toward the end of the day on Friday contributed to the domestic indexes' weekly losses. International stocks in the MSCI EAFE ended the week in positive territory, gaining 0.89%.
Despite the losses, all three major domestic indexes experienced their best year since 2013. During 2017, the Dow hit 71 record highs, and the NASDAQ gained in all but 1 month for the first time ever.
Overall, indexes posted the following growth for the year:
- S&P 500 up 19.42%
- Dow up 25.08%
- NASDAQ up 28.24%
- MSCI EAFE up 21.78%
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.
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?Let's take a look at a few economic indicators to examine where we are and what might be on the horizon.
- Gross Domestic Product: Economic growth picked up in the 2nd and 3rd quarters, and analysts believe the expansion could continue in 2018.
- Labor: The unemployment rate dropped to 4.1% by October 2017, and some analysts believe it could fall even more in 2018.
- 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.
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. 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.
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
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5- year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
These are the views of 4th River Financial Group, and not necessarily those of the named representative, and should not be construed as investment advice. Neither the named representative nor the Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P US Investment Grade Corporate Bond Index contains US- and foreign issued investment grade corporate bonds denominated in US dollars. The SPUSCIG launched on April 9, 2013. All information for an index prior to its launch date is back teased, based on the methodology that was in effect on the launch date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back tested returns.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
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