January 2018 Financial Markets Summary

2017 was a year for the record books.  Domestic stocks continued their strong performance with the Dow Jones Industrial Average breaking through its all-time high a record 70 times in 2017.  The famed technology sector led the way in the U.S. with Apple, Facebook and Amazon all climbing over 48%.

Even more impressively, all of this growth has taken place with very little volatility.  The stock market did not see any major (or even minor) setbacks throughout the year.  In fact, the S&P 500 has not experienced a 5% correction in the past 22 months, which marks the longest streak in over 22 years!

The current U.S. bull market is now the second oldest and second strongest in history.  We have certainly enjoyed the stellar year, but this reminds us to always be looking ahead and not in the rear view mirror.  The great Sir John Templeton once said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”  We do not see much euphoric activity (other than Bitcoin) suggesting this bull market is about to come to an end, but we believe we are entering the later stages of the cycle.  Monetary policies are more restrictive as Central Banks continue to increase interest rates around the world.  Even though profit margins are expected to experience a boost from tax reform, they are already at record highs.  We would love to see the markets climb higher in the U.S., but we expect more muted returns during these later stages.  This is an opportune time to rebalance portfolios back to the desired risk levels.

International stocks, on the other hand, seem to be in the earlier stages of their bull markets.  These did not disappoint in 2017 with Europe up 25%, Japan 21%, China 51%, India 36% and Argentina 72% respectively.  We would anticipate international stocks to continue outperforming domestic due to their more attractive valuations and stronger earnings growth.

Asset Index Category Category Category Category 10-Year
3 Months 2017 YTD 2016 Average
S&P 500 Index – Large Companies 6.1% 19.4% 9.5% 6.2%
S&P 400 Index – Mid-Size Companies 5.8% 14.5% 18.7% 8.3%
Russell 2000 Index – Small Companies 3.0% 13.1% 19.4% 7.2%
MSCI ACWI – Global (U.S. & Intl. Stocks) 5.4% 21.6% 8.4% 2.4%
MSCI EAFE Index – Developed Intl. 4.2% 25.0% 1.0% 1.9%
MSCI EM Index – Emerging Markets 7.4% 37.2% 11.2% 1.7%
Short-Term Corporate Bonds 0.0% 1.7% 2.1% 2.3%
Multi-Sector Bonds 0.4% 3.5% 2.6% 4.0%
International Government Bonds 1.5% 9.6% 1.6% 2.4%
Bloomberg Commodity Index 4.7% 1.7% 11.8% -6.8%
Dow Jones U.S. Real Estate 2.6% 9.8% 7.6% 6.9%


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment, strategy, or product or any non-investment related content, made reference to directly or indirectly in this newsletter, will be suitable for your individual situation, or prove successful. This material is distributed by PDS Planning, Inc. and is for information purposes only.  Although information has been obtained from and is based upon sources PDS Planning believes to be reliable, we do not guarantee its accuracy.  It is provided with the understanding that no fiduciary relationship exists because of this report.  Opinions expressed in this report are not necessarily the opinions of PDS Planning and are subject to change without notice.  PDS Planning assumes no liability for the interpretation or use of this report. Consultation with a qualified investment advisor is recommended prior to executing any investment strategy. No portion of this publication should be construed as legal or accounting advice.  If you are a client of PDS Planning, please remember to contact PDS Planning, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives.  All rights reserved.