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

Returns

With 3Q17 officially in the books let’s take a look at where the markets stand. Coming into the week, as of Monday October 2^nd US Stocks as measured by the S&P 500 were at +14.24% YTD, trailing their international developed and emerging counterparts thus far. International developed stocks as measured by the MSCI EAFE are at +20.47% YTD, and emerging markets are at +28.14% YTD as measured by the MSCI EM.

Valuations

Stocks do not look irrationally overbought in historical terms. US stocks are slightly about their long-term averages with a forward P/E of $17.70, and international stocks are below their long-term averages. International developed stocks have a forward P/E of $14.76 and emerging market stocks have a forward P/E of $12.51.

Growth & Profits

The final estimate for US 2Q growth is 3.1% annual rate which is the quickest pace in more than two years. US companies are showing 18.6% year-over-year operating EPS growth based on 2Q reporting.

Jobs

The US economy added 156,000 jobs in August and the unemployment rate rose to 4.4%. Production and nonsupervisory wages rose 2.3% year-over-year, slower than the previous month.

Inflation & Rates

August data is showing core inflation as flat year-over-year. While additional rate hikes may be temporarily delayed, the Fed explicitly announced its intention to begin the balance sheet normalization in October. The plan is for the Fed to decrease holdings of Treasuries and mortgage-backed securities by up to $10B in total per month in the 1^st quarter of implementation with an additional $10B increase each quarter thereafter. Ultimately decreasing holdings by $50B by the 5^th quarter of implementation.

Conclusion

Thus far the expected return of volatility in the markets in 2017 has failed to materialize. Stocks have continued a seemingly unshakable climb upward over the course of the year. Asked to explain this, I read somewhere a “market expert” describe the environment simply as “it’s a bull market.” This was a solid take, and it is likely to remain one until the something unforeseen comes along to knock things off course or it runs out of steam. It seems unlikely for the bull to run out of steam right now given low probabilities for global economic recession, continued economic and corporate growth and generally attractive valuations. Especially in international markets where valuations are cheap in relative terms and growth appears to be increasing.

– Wyatt Swartz

– 10/2/2017

The post can be viewed on Investopedia here.

Question Headline:

What are the risks associated with a Roth IRA?

Question Body:

Your Answer:

There are 3 primary risks associated with an IRA.

1. Poor Investment Choice Risk

• Presumably funds within a Roth IRA are being invested in market traded securities such as stocks, bonds, mutual funds, REITs, and ETFs. Investing in market traded securities always includes the risk of loss of principle. Investing funds within a Roth IRA or another account requires the investor to have the right mix of securities based on their goals, time horizon, and cash flow needs from the portfolio.

2. Changes in Investor Circumstances

• Funds invested within a Roth IRA grow tax-free and distributions in retirement (after age 59 ½) are also tax-free. These great features come with restrictions, specifically the accounts are meant for retirement savings. An investor that has a change in circumstances that needs to access their funds prior to retirement (age 59 ½) may face penalties and taxes.

3. Opportunity Cost Risks

• With any investment, there is always the risk of “missing out” on some other better investment, this is called opportunity cost risk. Investor capital that is allocated in a Roth IRA cannot be put towards other investment vehicles which ultimately might have proven more beneficial.

– Wyatt Swartz

– 9/25/17