Will the Strong Performance of 2017 Repeat in 2018?
Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 12/29/17. Rates and Economic Calendar Data from Bloomberg as of 01/02/18. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.
U.S. stocks finished the final week of the 2017 with a slight loss on low trading volume as many on Wall Street took the holiday shortened week off. The S&P 500 Index’s decline of 0.33% last week did little to detract from the +20% advance generated from 12 consecutive monthly gains. The Russell Midcap Index finished last week unchanged while the small cap focused Russell 2000 Index lost 0.4%. These indexes generated total returns for 2017 of 18.5% and 14.6% respectively. Internationally, developed markets gained 0.95% last week while emerging markets ended the year with a 1.7% advance. Last week’s gain takes the total return for international developed markets up to 25.6% for 2017. Emerging market equities outperformed throughout most of 2017 and ended the year with an impressive 37.8% total return.
2017 was a year when political headlines dominated, earnings recovered, and global growth synchronized. Despite geopolitical concerns, investor and consumer sentiment measures steadily gained throughout most of last year serving as an additional tailwind to equities. As we head into 2018, it appears that the same forces will be in play impacting capital markets. Serving as tailwinds to risk assets are economic growth, earnings growth, and sentiment. Potential headwinds this year include an unexpected pickup in inflation, higher interest rates, geopolitics, and trade. Looking ahead, 2018 may end up looking a lot like 2017 from a directional standpoint but it is likely that returns will be much milder across asset classes. This is due to the potential for peaking sentiment and higher valuations that the majority of asset classes now carry.
Today, Hennion & Walsh is proud to be able to help clients with all aspects of their financial life. Whether you are in need of comprehensive financial planning, an investment review, or simply want to purchase a fixed income security, we are here to help. To learn more about Hennion & Walsh’s variety of services, please do not hesitate to speak with your Hennion & Walsh Financial Advisor or a member of the Hennion & Walsh Asset Management Team. Happy New Year!
Important Information and Disclaimers
Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion & Walsh cannot guarantee the accuracy of said information and cannot be held liable. This information is provided for informational purposes only and is not a solicitation to buy or sell any of the asset classes or sectors discussed.
Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.
There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions. Distributions from REIT investments are taxed at the owner’s tax bracket.
The prices of small company and mid cap stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions.
Investing in commodities is not suitable for all investors. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity.
Products that invest in commodities may employ more complex strategies which may expose investors to additional risks.
Investing in fixed income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high yield bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than original cost upon redemption or maturity. Bond Prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the value of your investment.
MSCI- EAFE: The Morgan Stanley Capital International Europe, Australasia and Far East Index, a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada.
MSCI-Emerging Markets: The Morgan Stanley Capital International Emerging Market Index, is a free float-adjusted market capitalization index that is designed to measure the performance of global emerging markets of about 25 emerging economies.
Russell 3000: The Russell 3000 measures the performance of the 3000 largest US companies based on total market capitalization and represents about 98% of the investible US Equity market.
ML BOFA US Corp Mstr [Merill Lynch US Corporate Master]: The Merrill Lynch Corporate Master Market Index is a statistical composite tracking the performance of the entire US corporate bond market over time.
ML Muni Master [Merill Lynch US Corporate Master]: The Merrill Lynch Municipal Bond Master Index is a broad measure of the municipal fixed income market.
Investors cannot directly purchase any index.
LIBOR, London Interbank Offered Rate, is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.
The Dow Jones Industrial Average is an unweighted index of 30 “blue-chip” industrial U.S. stocks.
The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
DJ Equity REIT Index represents all publicly traded real estate investment trusts in the Dow Jones U.S. stock universe classified as Equity REITs according to the S&P Dow Jones Indices REIT Industry Classification Hierarchy. These companies are REITSs that primarily own and operate income-producing real estate.