January 2018 - Happy New Year, Happy New You

David L. Johanson |

SUMMARY

  • 2017 - Was almost a perfect year for stocks.
  • 2018 - Two scenarios with different possibilities.

I am not a New Year’s Resolution guy.  I find most people, myself included, don’t keep their resolutions much past two weeks.  Nevertheless, it is a useful time to take a look back and see where I was and where I am now.  What saw blades need sharpening?

On the first of every year, I write down three things - my weight, my golf index, and Dow Jones altitude… Also written in my journal are the top ten things I did in the past year.  I can look back over the last 37 years and review my life, year by year.

What a year 2017 was!  My weight, I'll leave private.  My golf index was a tad lower.  The Dow Jones had me jumping for joy.

There are a lot more than the three things mentioned to be focused on.  What is my happiness factor?  How do I find more joy and inner peace in my life?  How are my friends?

In reflecting upon 2017 let’s all try to find a little more happiness and joy in 2018.  Forget about the financial markets as they will do their thing.  Plenty of Powerball winners will tell you money does not assure happiness.  Of course, the lack of it sure can cause misery.  I guess that is why you have us...to help you enjoy life, doing the things you crave, and having us worry for you.

Some say there is a formula to a good life - a mix of love, work, and psychological adaptation.  A study conducted at Harvard University concludes that healthy, sustained relationships make us truly fulfilled.

They concluded:

  1. Social connections do matter.
  2. Quality is more important than quantity.
  3. Good relationships protect our brains.

Let’s all invest a little more in our relationships and friendships.  Invest in your relationships wisely.

2017 - Almost a Perfect Year for Stocks

2017 was almost a perfect year for stocks.  December notched it’s ninth straight month of gains. That is the longest monthly winning streak since February of 1959. The S&P 500 rose 19% with the NASDAQ up 28%.  The MSCI Asia Excluding Japan Index surged 47% last year.  International momentum is growing.

Each month built off each other with 71 record breaking stock days.  It doesn’t get much better than that.

Following a perfect year is seldom easy.  Expect market volatility to pick up, if and when, the Fed decides to press too hard.  International geo-political affairs are always on the radar.  Some other surprises may sprout but we’ll see…

2018 - Two Scenarios with Different Possibilities

The broad equity market has surged to new highs over the past eight years with inevitable fits and starts and divergent market leadership at different points in the cycle.

There are two primary scenarios for 2018 with distinct probabilities:

  1. A more hawkish Fed could repeat the mistakes of early 2016 and risk curtailing the cycle. (Low probability.)
  2. Corporate tax cuts and tax repatriation could sustain U.S. growth at a higher level, supporting the more cyclical segments of the U.S. market. (Possible.)

Here we are again, starting a new year.  We are the predominant economy of the world, with the values and dividends of our great companies soaring, and household net worth hitting new all-time highs.

Inflation-adjusted GDP was $2.5 trillion the year I was born, and will end this year north of $17 trillion, an increase of almost 7 times, yet the population has grown barely two and a half times.  Surely, this is the greatest leap in real per capita GDP in the history of the planet.

Regardless of whether the markets soar again in 2018, I optimistically look to the next 10 years to be filled with productivity gains, technological advances, and innovations in artificial intelligence and the medical sciences, to the likes of which will surprise us all.

We hope 2018 is your best year ever.  Now for me, back to my New Year’s resolution of losing 15 pounds…