Financial market conditions were exceptionally favorable in 2017 as global stock markets advanced with little turbulence. The combination of double-digit earnings growth, low volatility and below-average inflation produced “nirvana” — a wonderful investment environment. Nine years ago, this situation was merely a dream, but is now reality. In fact, this past year was the first time in 90 years that the S&P 500 produced a positive return for 12 consecutive months. Remarkable! The data further shows that there were only four other years with 11 positive months: 1936, 1958, 1995 and 2006. Clearly, 2017 was a special year. Moreover, the S&P 500 has already increased over 7% in January for its strongest start in 30 years. It also hit 14 record highs — the most in any month since 1955!

Today, the investment outlook is favorable with solid growth, low inflation, healthy consumer confidence and positive investor sentiment. The odds favor another year of double-digit returns for U.S. stock markets. However, there is concern that current conditions may weaken based upon “it can’t last forever” logic. Historically, we have one or two minor annual corrections, but 2017 marked the first time since 1995 that we did not experience a correction greater than 5%. In fact, we just reached the longest period without a 5% correction in history, lasting 400 trading days and counting. It is reasonable to expect a modest correction to cleanse the market of excesses. We are unlikely to have another year with such low volatility. Today, there is fear on Wall Street — the fear of missing out. FOMO! We remain committed to “time in the market” as opposed to “timing the market.” The challenge is to remain alert to over-exuberance with equities amidst these positive trends. A summary of last year’s index returns through December 31, 2017 is as follows:

Dow Jones Industrials +28.1%
Russell 2500 +16.8%
MSCI EAFE +25.0%
S&P 500 +21.8%
NASDAQ Composite +29.6%
Wilshire 5000 +21.0%

Investment Perspective Econ & Investment Outlook January 2018 (pdf)