December 2017 Market Insight

2017 Year in Review   

The year began with uncertainty.  After the election of Donald Trump, the market rallied quickly at the end of 2016.  Many saw stock valuations pop and wondered if there was anything material to support the quick rise in the market.  There was optimism that infrastructure investment, deregulation, and tax-cutting would work its way into the US economy, but also worries that quick growth would cause the Fed to aggressively hike rates and stall the rally.   

Repeated “Goldilocks” reports of economic growth, inflation, and jobs kept the market ticking up month after month.  Volatility remained at all-time lows and the Fed maintained a cautioned rise in interest rates.  FANG stocks (Facebook, Amazon, Netflix, and Google Alphabet) led domestic markets to repetitive all-time highs while international stocks outperformed all asset classes.  Every one of the world’s 45 major economies grew, which was a remarkable occurrence.   

2018 Outlook   

With momentum in the market moving into 2018 there are a number of items to notice.  The unemployment rate is very low and the labor market is tightening.  This tends to boost consumers but is often an indicator that wages will increase and inflation will start ticking up.  At the same time, the Fed is reducing its balance sheet.  This is a change from the last roughly 10 years and there is a very narrow path that must be followed in order for optimal growth to continue.   

Tax reform is a potential positive for the market.  Although much of the expectations of the Tax Cuts & Jobs Act have already been priced into the market, there is a possibility that the bill will boost economic growth and corporate earnings in 2018.  However, the failure for tax reform to have a significant impact on earnings poses a risk.   

As all these factors come into play there is an expectation that there will be bouts of volatility.  Make sure you’re following a disciplined process and have a good plan if and when the next market pull back happens.   

Regardless of what happens this year in the market, we are very honored and excited to walk with you and help you reach your goals.