Weekly Market Commentary January 2, 2018

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The S&P 500 completed the equivalent of bowling 300 by finishing all 12 months in positive territory, after accounting for dividends. U.S. stocks gave up some of their December gains last week as the S&P 500 fell 0.4%. The MSCI ACWI rose 0.4% on strong results from developed and emerging markets. The Bloomberg BarCap Aggregate Bond Index climbed 0.5% last week, nearly making up for the previous week’s decline.

Performance Insights

Technology was the top performing sector in 2017. The MSCI USA IMI Information Technology index rose 35.5% for the year and easily bested the MSCI USA IMI Health Care index, which rallied 21.6%. Don’t assume the gains will continue. Technology has outperformed its parent index by more than 10% in five calendar years, beginning in 1998. It has only outperformed one time the following year. That was in 1999 and represented the peak of the technology bubble.

Key points for the week

  • Many markets around the world performed well and some even outperformed the U.S. in 2017.
  • ETF assets soared in 2017 and are expected to do the same in 2018.
  • Municipal bond issuers and investors are still sorting out how the new tax law will shake up that sector.

What are we reading?

Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links.

U.S. stocks had a banner year in 2017. These markets did even better

The U.S. wasn’t the only country to benefit from a strong bull market in 2017. Countries that saw the most growth were Argentina, Turkey, Nigeria, and Hong Kong. These year-end performance numbers only heighten our stance on the international space as the combination of a weak dollar and strong global economic growth has made other markets just as attractive, if not more so, as the U.S.

ETF investors can keep winning big in 2018 as fee wars wage on

Investors benefited greatly from low-cost ETFs in 2017 and are expected to do so again in 2018. ETF issuers are in a pricing war, which is a positive for investors. On average, fees for ETFs are around 40 basis points, less than half those of mutual funds, and are continuing to decrease. Investors are not trying to invest in complicated, actively managed ETFs as half of the inflows went to the top 25 ETFs. The low volatility and continuous highs continue to make ETF strategies more attractive.

In U.S. tax confusion, muni investors take refuge in the known

The recent tax reform has left many investors confused, which has resulted in a reversion to the known: municipal bonds. December saw $58 billion in municipal bond issuances, illustrating the uncertainty of everyday investors. Expect tax-advantaged strategies to increase in demand. We continue to innovate and openly communicate with our clients in a dynamic investing environment, so please feel free to contact us if you have questions about the impact of the tax legislation on your investments.

Fun story of the week

$1 billion in gift cards go unused every year

The truth is in the title. The gift card you received from your second cousin twice removed for the holidays will probably sit in your wallet until it expires. But there are ways to utilize these unwanted gift cards by listing them on different websites, such as Raise and Cardpool, marketplaces for gift cards. So, next holiday season when you receive a gift card for Dunkin Donuts, but you only drink Starbucks, make an exchange and give your cousin a genuine thank you.



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