As 2017 comes to a close, I am feeding into the obligatory New Year’s prediction hype. This year was a very good year to own stocks, most domestically and internationally. In fact, according to The Wall Street Journal, international equities did better than U.S. stocks for the first time since 2012.
Fueling the rise in stocks around the globe were technology companies, an uptick in growth around the world and relatively tame inflation readings that have kept central banks from reigning in their accommodative policies too quickly. Here at home, prospects of corporate deregulation and tax reform also created an optimistic air on Wall Street.
Through the close on December 29, the final U.S. trading day of 2017, the Dow Jones industrial average had posted 71 record closes, the most in a calendar year ever and its best year since 2013, according to The Wall Street Journal.
The three major U.S. stock market indexes–the Dow industrials, S&P 500 and Nasdaq Composite–all posted their best years since 2013.
According to FactSet, companies in the S&P 500 are now trading at roughly 23 times their past 12 months of earnings, compared to the 10-year average of about 17-times earnings.
Internationally, stock indexes also posted strong gains. Hong Kong’s Hang Seng gained 36%, its largest annual increase since 2009. Japan’s Nikkei index rose 19%, the most since 2013 and London’s FTSE-100 added 7.6%, ending the year at an all-time high.
AAII Weekly Survey Question
With the U.S. bull market closing in on its ninth year, it’s not unrealistic to ask “where do we go from here?” And that’s exactly what I did. Two week’s ago, I posed this question to our readers:
What is your prediction for the S&P 500 in 2018?
Here are the results:
Over the last two weeks, 2,526 readers participated in this survey.
With 38% of the votes, the biggest block of our readers believes the S&P 500 will rise between 6% and 10% in 208, taking a relative breather compared its 21.8% advance this year.
Coming in second with 24% of the votes, our readers think the S&P 500 will be relatively flat in 2018, losing no more than 5% and gaining no more than 5%.
Twenty-two percent of our readers are optimistic that the S&P 500 will rise between 11% and 20% in 2018 while only 4% think the S&P 500 will turn in another 2017-like performance by adding more than 20%.
Only 11% of our readers see the S&P 500 turning in a negative 2018 (outside of those that see the index being flat). From this group, only 20% see the S&P 500 entering bear market territory with a 20% or more decline.
Weekly Special Question
As we enter 2018, I was also curious to see what our readers are hoping for in the New Year. So the last special question asked:
What is on your investment wish list for 2018?
Perhaps not surprisingly, the biggest single block of responses (26%) called for continued portfolio and stock market gains in 2018.
However, I was a bit surprised that the second most common wish for 2018 was a market pullback or correction (10%). However, upon further reflection, this would alleviate the fear that the market is overvalued and would present a buying opportunity for some investors.
The third largest block of responses wished for higher interest rates in 2018, as many investors continue to feel the pinch of a decade of record-low interest rates.
Here is a sampling of our readers’ wishes for 2018:
- “A raise so I can increase my 401k contribution!”
- “A bitcoin bubble implosion.”
- “Ability to predict the market peak.”
- “Continued bull market and no black swans!”
- “To make money!”
- “Protection of capital.”
- “A ‘correction’ so I can buy on the dip.”
- “Little volatility.”
Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.