Here we are one month into 2018 and the market is still bullish, despite a pull back today. First, let’s look back at the 4th quarter and 2017 the year.
Market shatters records
2017 shattered many records, but not the ones most folks think of. The records left shattered in many pieces in 2017 were all risk-related. Specifically, 2017 was the year that risk forgot. Metaphorically, this was the year in which a blindfolded driver could drive across town. . .and not hit anyone or anything along the way.
Here is just a few of the shattered risk-related record for the Dow and S&P.
-Dow Industrials greatest number of days in history without a 1% move (72).
-Dow Industrials closed at new all-time highs a record 71 times in 2017.
-S&P 500 Total return Index gained in every month of 2017 and ended the year with record 14 consecutive up months.
-S&P 500 ended the year with record 289 consecutive days without a 3% pullback.
We could go on and on, but you get the idea.
The 4th quarter of 2017 continued the strong run by the equity markets. The S&P 500 gained 6.64%, the NASDAQ gained 6.27%, International Developed Markets were at 4.23% and Emerging Market Stocks were especially strong at 7.44%.
For the full year, the S&P 500 returned 19.42%, the NASDAQ gained 28.24%, International Developed Markets returned 24.21% and Emerging Market Stocks were at 37.28%.
On the Fixed Income side, the Fed raised interest rates once again by .25%, elevating the U.S. Federal Funds rate range to 1.25%-1.50%. The Fed has also forecasted another three rate hikes in 2018 and two hikes in 2019.
In summary, this Bull market is long in the tooth and if we look at the Cyclically Adjusted Price to Earnings (CAPE) ratio at 32.46 then this market is overvalued. With that said, at least in the short run this market is also charging down the tracks with no sign of stopping.
So, what do you do?
- Focus on your own personal objectives. It is always wise to create realistic time horizons and return expectations for your own personal situation and to adjust your portfolio accordingly.
- Remember to compare your portfolio with portfolios of the same asset blend. Although stocks are up your portfolio is diversified and usually holds a percentage in bonds.
- Review your portfolio and discuss any concerns with us. Markets are strong, and times are good which makes THIS the time to review your portfolio and align with your specific goals.
see link above for graph