Quarterly Update

Happy New Year! Well, I don't know about you but I'm excited to start 2018. Last year was a great year but was also challenging in many ways, dominated of course by the North Bay fires and other natural disasters. Reviewing the Time Magazine 2017 retrospective issue over the Holidays showed just how intense much of 2017 was.

But last year was also a solid yet quiet one for stocks. I recall having conversations with clients a year or so ago about the potential disconnects between the social, economic, and market outlooks at the time. That certainly proved to be the case in 2017. If nothing else, the stock market's run last year showed just how dispassionate Mr. Market is, even while being subject to fits of melodrama.

As had been the case all year, more aggressive portfolios saw continued strong returns during the fourth quarter. The S&P 500 was up almost 7% during the last three months of the year and the Dow 30 was up nearly 11%. Emerging market stocks, which turned out the best performance of 2017, was up 7.5% during the quarter.

The bond market continued its comparatively modest performance during the quarter and year-to-date, with the U.S. Aggregate index generating 0.4% and 3.5%, respectively. Corporate bonds fared better than Treasurys, and high yield (aka "junk") bonds performed better, but bonds as a category woefully underperformed the stock market. This is what bonds due when stocks are up. They chug along maintaining their value and paying their interest payments, a virtue when stocks are down but challenging in years like 2017.

Here's a roundup of how the major indexes performed during the quarter and year-to-date:

• S&P 500: 6.6% and 21.8%
• Dow 30: 11% and 28%
• Small Caps: 3.3% and 14.7%
• Foreign Stocks: 4.3% and 25.6%
• Emerging Mkts: 7.5% and 37.8%
• U.S. Bonds: 0.4% and 3.5%

Here's how some other rates and indicators stood at year-end:

• Prime Rate: 4.5% (began the year at 3.75%)
• 10yr Treasury: 2.4% (began the year at 2.45%)
• 30yr Mortgage: 4.16% (began the year at 4.39%)
• Oil (WTI): $60 per barrel, up from $54 a year ago
• Gold: $1,291, up from $1,146 a year ago
• The Dollar: down on the year versus other major currencies, which helped drive U.S. and global stock market performance.

Have questions? Ask me. I can help.