As 2017 wrapped up, December showed more gains in the US markets and finished higher for the quarter as well as for the year. Much of the headlines in Q4 were dominated by the new tax legislation (which ultimately passed), President Trump’s political strife, and the booming interest in cryptocurrencies.  Most important to our business, is that the markets climbed higher and were driven by strong corporate earnings, low unemployment, tame inflation, and solid economic data.  Interest rates (as measured by the 10-year treasury) started the year at 2.45%, hit a low in September (2.03%), but trended higher through year end to finish nearly where they started the year (2.41%) as the Fed made their third rate hike of the year in December. Here’s how the major indexes looked at end of December:

          2017 was an interesting year in many respects.  The markets were resilient amid a number of potentially disruptive events, whether it was rising tensions globally or Mother Nature’s Wrath we felt here at home. Most analysts predicted conservative numbers heading in to 2017 (mostly concerned with the uncertainty of a Trump Presidency), so most were off-mark with their predictions by year-end.  NOTE: I always take those analyst “predictions” with a grain of salt anyways.  Granted, forecasting the market is difficult (near impossible) but I would love to see their paycheck diminish depending on how far “off” their predictions were.  I mean, what is at stake when they make these predictions?  It seems like it is just for fun, and throwing guesses out there to see what sticks. Did the analyst who predicted a market pullback get paid any less for being off target?  Probably not. But I digress.  When it was all said and done, the markets saw through the whirlwind of negative news happening around the world and the Dow Jones Industrial Average hit 70 new highs in 2017!  Also of note was the price of gold increasing over 10% (especially with all the talk about Bitcoin!) and the price of brent crude oil increased over 5%.  For those following the US dollar, it slumped nearly 10% for the year.

        One celebrated milestone that some overlooked was this was the 20 year anniversary of the ROTH IRA!  Ok, maybe I was one of the few celebrating, but I do recall scraping together two-grand and making my first Roth IRA contribution in 2007.  I am glad I got started back then and have tried to add it it annually when possible. Our present day environment still makes Roth IRAs relatively attractive versus other investment vehicles, and recent tax law changes didn’t eliminate the back-door Roth IRA strategies.  So talk to me about them – if we haven’t already!

        With that said, I will be carefully watching certain themes in 2018.  Always of interest is where interest rates go (we expect more rate hikes) and if/when the unemployment rate changes course (it’s 4.1% now – down from 10.0% eight years ago). These could require adjustments to our investment strategy.  It will also be worth watching how the new tax legislation and expected infrastructure spending evolve – most think it will be a benefit to our economy, particularly in the short term.  Lower corporate tax rates could incentivize companies to deploy more capital.  Many say that technology, energy, and infrastructure could see some momentum in the year ahead.

        A final word as we look ahead at 2018: repeating last year’s robust returns may be a challenge.  I do believe there is still some room to run in this market, but would not expect this coming year to be as fruitful as 2017.   I am cautiously optimistic and do think it could be another solid year ahead, but understand that this bull market is a little long in the tooth.  We need to be prepared that there could always be that inevitable pullback, but a well-constructed portfolio should be able to weather any storm.   So in a world where there is constant headwinds and reason to worry, I think those who are disciplined, rational, and have faith in the free markets – could very well be rewarded once again.

  Brandon

Disclaimer: This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the advisor. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Haver Analytics. Data is taken from sources generally believed to be reliable but no guarantee is given to its accuracy.