By all accounts, 2017 was an excellent year for investments. The U.S. stock market was up 21.13%i. Developed international stock markets were up 25.03%ii. Emerging markets’ stocks were up 37.28%iii. U.S. high yield bonds returned 17.16%iv. Global bonds—despite a large portion starting the year with non-existent or negative yields—returned 7.39%v. U.S. real estate returned 6.89%vi. The U.S. investment grade bonds market was up 3.54%vii. U.S. agency mortgage-backed securities, REITS, treasuries, municipal bonds, and commodities were all positive for the year. Inflation was a mild 1.8%viii.
Not only were real returns positive and strong across the board, but the path to those returns was remarkably steady. As of December 31, 2017, the U.S. stock market is in its longest stretch in history without a 3% or greater decline from its highest pointix. Global stocks, for the first time ever, were positive every month of the yearx. High nominal returns, low but positive inflation, and steady returns—that’s an investor’s best-case environment.
Global stock market performance since the end of the financial crisis in early 2009 has been good. But 2017 stands out. Look back to 2009, 2010 and 2011 to remember what volatility felt like. In each of those years an investor had to ride out mid-teen to low-twenty percent declines, with the financial crisis fresh in mind. Whereas in 2017 it was a climb straight up, generally at 1% or 2% per month, for twelve straight months. 2017 is certainly the exception, and not the rule.