2017 SIA Perspectives
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In summary, financial markets displayed “relative calm” in 2017, as many stock market segments posted a ninth straight year of gains, with only slight pullbacks during the year. Small price increases from most bonds, plus interest payments, produced returns that kept pace with the rate of inflation. Prior to introducing our analysis of this year’s performance in greater detail, we outline important quarterly events.
Last quarter we investigated why investors seemed fearful of a stock market that consistently moved higher with the theme “Running with the Bulls”. Our discussions addressed geopolitical, presidential, congressional and domestic policy concerns. Also with our commentary, we provided an explanation of our role as behavioral coaches and advised clients to ignore headlines touting “The Next Bear Market”. This solid advice added value as the 3rd quarter posted further gains for portfolios.
We have urged Clients to focus on the benefits of positive economic news, low interest rates and tame inflation and for them to disregard negative headlines. By ignoring such headlines, disciplined investors were rewarded again in the 2nd quarter as many stock markets reached new record levels and bonds provided additional sources of gains. In fact, most major stock market benchmarks, and several bond market benchmarks, posted 2nd quarter returns that pushed results for 2017 well-above what one might expect for an entire year!
Our 4th quarter SIA Perspectives highlighted 2016’s “Tale of Two Markets” as the performance of stocks and bonds flip-flopped from the 1st to the 2nd half of the year. “It was the best of times, it was the worst of times”, yet most stock markets rebounded strongly in the 2nd half to end the year with double-digit gains. Meanwhile, bonds gave up their 1st half leadership as prices dropped during the 2nd half, leading to minimal results for the whole year.