Closing Out 2017 & Looking Forward to 2018

in Market Commentary by

A selloff in the final trading minutes of the year pushed stocks into the red for the shortened holiday week. Technology stocks lagged for the week, led by Apple after some analysts suggested demand for the iPhone X was lower than expected and there was backlash against throttling performance of older phones. The market’s muted reaction in the first full week of trading after the passage of the tax bill suggests most of the benefits were widely expected and are likely already baked into prices.

Weekly Returns:

S&P 500: 2,674 (-0.3%)
FTSE All-World ex-US: (+0.6%)
US 10 Year Treasury Yield: 2.41% (-0.07%)
Gold: $1,303 (+2.2%)
EUR/USD: $1.120 (+1.2%)

Major Events:

  • Wednesday –JPMorgan Chase agreed to pay $2.8 million to settle charges that it failed to segregate client assets from its own.
  • Wednesday – The Wall Street Journal reported many comments posted about the DOL Fiduciary rule were fake. It is unclear who made the posts but most were critical of the rule.
  • Thursday – Doug Jones became the first Democrat in 25 years to be confirmed as a Senator of Alabama.
  • Friday – President Trump tweeted that the USPS should charge more for delivering packages for Amazon and others.
  • Friday – Pershing Square and Valeant agreed to a $290 million settlement regarding improper trading before a 2014 bid for Allergan.

Our Take:

2017 was an interesting year. The news was dominated by disturbing headlines including severe natural disasters, mass shootings, and threats of nuclear war. Meanwhile, a heightened sense of dividedness blanketed the country. Capital markets didn’t care. The S&P 500 rose over 21%, including dividends. While this marks just the 31st best year since 1926, the tranquility was truly special. The S&P 500 moved by more than 1% on just 8 days in 2017, compared to 27% of all days over the last 10 years. There were no 2% moves and the biggest peak to trough decline was just 3%.

For those invested in a strategic long-term allocation, this was rewarding and stress-free. We don’t see any immediate catalyst for what would cause volatility to rise to more normal levels, but we suggest investors be ready for it to happen eventually. 2017 was also a good year for many stock-pickers. The trendiest names, such as Apple, Amazon, Facebook, Netflix and Tesla were all up around 50%. This makes the new-year a great time to revisit allocations and ensure your strategy fits your long term goals and risk tolerance. Historically, most stock pickers and market timers don’t fare well over full market cycles and sector rotation can happen quickly and intensely.

We don’t know when this bull will end – there is no reason it has to any time soon. But a repeat of the ease of 2017 is unlikely. For the long weekend ahead, we hope you take a moment to reflect. And if your situation permits, consider using some gains from 2017 to do something memorable with friends or family in 2018.

From all of us at Personal Capital, we wish you a happy, safe and prosperous new year.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as the Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

One Response

  1. J. Clifford Harvey

    Your comments are more proof that in the world of capitalism, the facts are more important than the perceptions. Politics is about perceptions and markets are about facts. So the lesson here is keep you perceptions to yourself and focus on facts.

    Reply

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