by Linda S. Parenti, CFA
President & Chief Investment Strategist
At this point on the calendar, we are just a few weeks away from the finish of a very remarkable year for investors. If December delivers a positive total return on the S&P 500, we will not have seen a negative return for any single month in 2017. In fact, that will be the 14th month in a row! As of this writing, December’s total return is positive month-to-date, so let’s keep our fingers crossed.
Volatility has been especially low this year. On a closing basis, the S&P 500 has not moved more than 2% up or down on any single trading day all year. This has been a nice change of pace from previous years, but long-time market participants know such a lengthy stretch of low volatility is not typical. Investors should expect the possibility of more normal market behavior next year. Some on Wall Street say they would even welcome a pullback as a buying opportunity. If this year has taught us anything, however, it would be the futility of market timing.
Looking ahead to next year, I believe the current environment of synchronized global economic progress should continue to provide earnings growth and be supportive of equity prices. A risk to that forecast would be the appearance of higher than expected inflation during the year, which might sway the Federal Reserve to quicken the pace of interest rate hikes. Slow and deliberate rate hikes are well tolerated by a healthy economy, but a rapid rise in interest rates could slow or halt the growth we have been enjoying domestically. Fortunately, other central banks are still in accommodative mode and their economies are strengthening, making international equities look attractive. An increased allocation to stocks overseas may be a worthwhile offset to potential Fed missteps here at home.
For those who follow my writings, you may be wondering if I am a perm bull because I have held an optimistic opinion towards stocks for more than eight years. In truth an investor must maintain a positive, long term outlook to gain the highest potential return from equities. However, that does not mean markets never go down. Economies are cyclical; therefore, markets also experience both bull and bear market periods. In my years as an investment professional, I have managed client assets through five bear markets. While I will never believe I am prophetic enough to time the market, there will come a day when my outlook may be less constructive. However, I do not believe we have reached that point in this bull run quite yet.
I mentioned above that I have been writing Market Insights for some time now. I am proud to say that this month is my 100th issue! While I look forward to contributing future writings, it is high time to share some insights from the other members of our talented investment team. Expect to hear occasionally from a new face on this monthly investment piece in the year ahead.
Lastly, I hope you will take time to visit our newly launched website at home.mybuckingham.com. Look for the “Our Insights” tab where you will find previous issues of Market Insights and a variety of other articles written by our company wide team of knowledgeable and experienced professionals.
RISKS AND IMPORTANT CONSIDERATIONS
Views and opinions expressed here are for informational and educational purposes only and may change at any time based on market or other conditions or may not come to pass. This material is not a solicitation to buy or sell securities and should not be considered specific legal, investment, or tax advice. The information provided does not consider the objectives, financial situation, or particular needs of any specific individual. All investments carry a degree of risk and there is no certainty that an investment will provide positive performance over any stated period. Equity investments are subject to company specific and market risks. Equities may decline in response to adverse company news, industry developments, or economic data. Fixed income securities are subject to market, credit, and interest rate risks. As interest rates rise, bond prices may fall. Past performance is no guarantee of future results.