Investing in 2017 may be remembered as the year that almost everything went up. Stocks, bonds, real estate and commodities all produced positive returns for the year. Neither Geopolitical tensions nor US government dysfunction could stop equity markets from their steady advance. Global stocks had no negative months in 2017, a remarkable feat.
US Equities notched their most daily closing records in any single calendar year. Many credit strong corporate earnings and solid revenue growth. Anticipation of a lower corporate tax rate also was given credit for the rush into US stocks. As the current bull market in large US stocks reaches nine years, it represents the longest-running rally since World War II.
Foreign stocks performed even better than the US with Emerging Markets leading the way. This helped our portfolios which are heavily weighted both in developed and emerging international equities. Weakness in the US dollar versus foreign currencies enhanced good returns from overseas stocks. In an uncommon occurrence, all 45 countries of the Organization for Economic Development Cooperation were on pace to have economic expansions for the year. The Eurozone, long mired in no or low growth, is now expected to show healthy economic gains going forward.
Bond prices are stuck in neutral, and that’s not a bad thing. The benchmark 10-year US Treasury rate started and ended the year at almost exactly the same yield, in defiance of analysts’ predictions of higher rates due to a surge in economic growth and inflation. Short-term interest rates went up as the Federal Reserve raised interest rates three times during the year. The Fed also indicated they plan on raising rates again in 2018. As short-term rates approach the same level of long-term rates, the economy often has trouble continuing its expansion.