2017 was another record setting year for equity markets. There was not only growth in U.S. markets, but, extreme growth in Non-U.S. equities throughout the year. Nearly all equity markets finished the year at near or record highs. News headlines continued to be dominated by president Trump, and politics generally overshadowed the storylines in economics and capital markets. The two big stories for investors in 2017 should have been the uptick in economic expansion abroad coupled with the first year for international developed and emerging markets to both beat US stocks since the bull market got started in March of 2009, and the lack of volatility in equity markets. 2017 was an uncharacteristically smooth climb for capital markets. There were no market corrections in 2017; the last full correction came in 1Q2016.

• Vanguard Total World Stock ETF (Ticker VT): +24.49%

• iShares MSCI World ETF (Ticker URTH): +22.96%

• iShares MSCI ACWI (Ticker ACWI): +24.35%

U.S. Stocks

The U.S. Major stock indexes all hit record highs this year. Driven by expectations of tax-reform, strong earnings, a growing job market, and international growth, markets reached higher levels throughout the year, extending this seemingly never-ending bull market. Here are the major stock indexes 2017 gains:

• SPDR S&P 500 ETF (Ticker SPY): +21.7%

• iShares Russell 2000 ETF (Ticker IWM): +14.59%

International Stocks

2017 was a bounce back year for international markets and economies. This is due to most major global economies experiencing synchronized economic growth, coupled with attractive valuations. Additionally low inflation and a weak U.S. dollar made international stocks especially good for US investors.  A rebound in global trade, exports, and manufacturing activity, all helped spur the success in foreign markets.

• iShares MSCI EAFE ETF (Ticker EFA): +25.1%

• iShares MSCI Emerging Markets ETF (Ticker EEM): +37.27%

The Donald

Donald Trump was certainly the primary headline maker in the 2017, and while he loved to note the climb in equity markets it is hard to say how he or his administration influenced the markets. Considering international developed and international emerging markets both outperformed US stocks, it could be argued that the Donald may have been a drag on US stocks. In general politicians tend to get way too much credit and blame for capital market movements, and I think that’s the case for Trump in 2017.

The Fed

The Federal Reserve increased interest rates 3 times in 2017. The fed attributed the increase in rates to a stronger job market and overall healthy economy. We expect to see several more interest rate hikes in 2018 due to strong outlooks on the economy.

Tax Reform

One of Trump’s main campaign points was decreasing income tax and corporate tax rates. The expectations of this decrease, increased investors belief in the stock market leading to the continuation of the bull market and record highs throughout US markets. A decrease in tax rates will improve corporate tax returns and should improve earnings per share for investors.

Strong Earnings Reports

According to Bloomberg, U.S. companies experienced the best earnings season in the past 13 years. In every sector, at least half of companies exceeded earnings expectations. Corporate earnings were driven by an overall healthy market, historically low unemployment, and a sinking US dollar.

Commodities

According to HSBC’s commodity price index, commodity prices increased by 7% in 2017. The price of gold rose approximately 10% in 2017. Oil prices rose nearly 18%, being priced above $60 for the first time since 2015.

 

– Wyatt Swartz

– 1/15/2018

– Contributions by Eli Perlmutter