US stocks mount milestone-shattering run in 2017
Taken a look at your stock portfolio lately? It’s a good bet it’s racked up solid gains this year.
Wall Street has taken stock investors on a mostly smooth, record-shattering ride in 2017. The major stock indexes are closing in on double-digit gains for the year, led by Apple, Facebook, and other technology stocks.
‘‘This would go in the category of stellar year, with very little volatility in the market and pullbacks that were essentially minor,’’ said Quincy Krosby, chief market strategist at Prudential Financial.
Several factors kept the market on an upward grind for most of the year and repeatedly drove stock indexes to all-time highs. The global economy rebounded, while the US economy and job market continued to strengthen, which helped drive strong corporate earnings growth.
Investors also drew encouragement from the push in Washington, D.C., to slash corporate taxes, roll back regulations and enact other pro-business policies. Congress passed the $1.5 trillion tax overhaul bill, which reduces corporate taxes from 35 percent to 21 percent, last week.
The S&P 500 index is on track to finish the year with a gain of about 22.5 percent, counting dividends. That means if you invested $1,000 in an S&P 500 index fund at the beginning of the year, you’d wind up with about $1,225 at the end of the year.
Other major market indexes also were on course to deliver solid gains. The Dow Jones industrial average gained 25.1 percent, while the Nasdaq composite is headed for a 28.2 percent gain. The tech-heavy index blew past the 6,000-point mark for the first time in April.
Small-company stocks, which trounced the rest of the market in 2016, got a boost this year as investors bet that the companies would be big beneficiaries of a corporate tax cut bill. The Russell 2000 index of smaller-company stocks is on course for a 13.1 percent gain.
For the most part, markets overseas also fared better this year than in 2016.
In Europe, Britain’s market closed the year with a gain of 7.6 percent. Indexes in Germany and France finished 2017 with gains of 12.5 percent and 9.3 percent, respectively. Japan’s Nikkei and Hong Kong’s benchmark index notched gains of 19.1 percent and 36 percent, respectively.
The gains in overseas markets reflect how economies in Japan, Europe, China, and many developing nations began growing in tandem with the United States for the first time in a decade. The United States delivered GDP growth of 3.1 percent in the second quarter and a 3.3 percent gain in the third, its fastest rate in three years.
‘‘We hadn’t seen that kind of growth all together in a long time,’’ said Paul Christopher, head of global market strategy for Wells Fargo Investment Institute. ‘‘We had a pretty strong third quarter and we’re going to have a pretty strong fourth quarter, too.’’
The market also rode out many negative headlines in 2017.
North Korea tested a ballistic missile for the first time in July. Then, reportedly, a hydrogen bomb in August. Major hurricanes slammed into Texas, Louisiana, and Florida. And congressional Republicans’ failed attempts to repeal the Affordable Care Act fueled worries on Wall Street that the Trump administration’s plans for a sweeping corporate tax cut and other pro-business policies would be delayed or derailed entirely.
Still, investors seemed determined to keep the market moving higher. On days when the market pulled back, stocks typically rebounded the next day.
‘‘You had geopolitical risk with regard to North Korea and the saber-rattling on both sides caught the market’s attention, but it became a buying opportunity,’’ Krosby said.
The last time the S&P 500 had a correction, or a decline of 10 percent or more, was in February 2016. In 2017, the biggest single-day drop was less than 2 percent.
And the VIX, a measure of how much volatility investors expect in stocks, is on track to end near historic lows. Traders repeatedly bought back in on bad news in 2017 because they, and corporations, have a lot of cash and don’t see better places to get a return as long as the economy and company earnings continue to improve, Christopher said.
‘‘People have just been waiting for pullbacks to buy the dips,’’ he said. ‘‘There’s still a lot of cash on the balance sheets of businesses and households.’’
And now eight years into the bull market, many analysts expect stocks to keep climbing next year.
‘‘We expect the bull market to continue in 2018, but at a more moderate pace,’’ said Terry Sandven, chief equity strategist at US Bank Wealth Management.