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A BIG YEAR FOR THE STOCK MARKET


By KARL RUSSELL and LANDON THOMAS JR. 
The major stock market indexes broke countless records in 2017, rising consistently throughout the year. Investors were heartened by President Trump’s promise to cut taxes and regulations. Strong economic growth around the world and nary a sign of inflation also contributed to investors’ cheery mood.

Political Milestones

After falling sharply in the hours after President Trump was elected in November, the stock market quickly reversed course. In January it rose sharply on hopes that Mr. Trump’s promised tax cuts would boost corporate profits. Stocks also were immune to a series of geopolitical disturbances, from tensions with North Korea to investigations into Mr. Trump’s ties with Russia. The markets ended the year on a tear once it became clear that tax cuts would become law.
2,700
S.& P. 500-stock index
Daily closes
2,650
JAN. 20
MAR. 20
AUG. 8
+19%
IN 2017
2,600
Trump
inaugurated
F.B.I. Director James B.
Comey announces investigation
into collusion with the Russian
government by the Trump
campaign.
Trump threatens
North Korea with
“fire and fury”
2,550
2,500
2,450
2,400
2,350
MAY 17
DEC. 1
2,300
News breaks that Trump
had asked Mr. Comey to drop the
investigation of Michael Flynn
Mr. Flynn
pleads guilty to
lying to the F.B.I.
2,250
2,200
J
F
M
A
M
J
J
A
S
O
N
D
Source: Thomson Reuters

Continuing One of the
Longest Bull Markets

At over 3,000 days and counting, this bull market has been one of the longest on record. It started in March 2009, fueled by the belief that aggressive policies by the Federal Reserve would halt the stock market’s fall. It’s been rising ever since, propelled by gushers of money looking for rich returns. According to data from Edward Yardeni, the current eight-year run trails only the boom from 1987 to 2000.
3,000
1,000
2
S.& P. 500-stock index
6
3,219
days
1,826
days
Scale is logarithmic to show
comparable percentage changes
+295%
1
+102%
4,494
days
100
+582%
5
1,839
days
4
2,248
days
+229%
Longest bull markets
+126%
3
10
2,954
days
+263%
1
1930
1940
1950
1960
1970
1980
1990
2000
2010
Sources: Yardeni Research; Thomson Reuters

Driven by Smaller Tech Companies

Technology was the top performing part of the stock market in 2017, up 34 percent. But it wasn’t the giant, household-name companies like Google and Facebook at the top of the list, even though those companies had banner years. Instead, it was slightly smaller — but even faster growing — companies, including the electronic-payments company PayPal and the interactive gaming company Activision Blizzard.
S.& P. 500 sectors 2017 percentage change
Top performers within the top three sectors
Information technology
+34.3
%
Micron Technology
+90.7
PayPal Holdings
+87.9
Nvidia
+84.9
Activision Blizzard
+75.6
Lam Research
+75.5
Health care
+26.4
Align Technology
+135.6
Vertex Pharmaceuticals
+105.2
Centene
+82.1
Intuitive Surgical
+74.5
Illumina
+69.9
Materials
+24.5
FMC
+68.0
Avery Dennison
+64.6
Sherwin-Williams
+53.7
Albemarle
+49.2
Freeport-McMoRan
+46.1
Industrials
+23.8
Financials
+20.9
Consumer discretionary
+15.0
Utilities
+11.0
Consumer staples
+10.4
Real estate
+6.8
Energy
–5.7
%
Telecommunication services
–11.9
Source: Thomson Reuters

But Possibly Values Too High

The strong markets have pushed stock valuations to dizzying heights. Some investors worry that a correction is coming. Others fret that the low readings on the VIX index, which measures expectations about upcoming market volatility, mean that investors are complacent about possible risks in the market.
25
80
CBOE Volatility Index
(VIX)
70
20
60
50
15
40
10
30
S.& P. 500
price-to-earnings ratio
20
5
10
Plotted weekly
0
0
’07
’09
’11
’13
’15
’17
’07
’09
’11
’13
’15
’17
Note: The VIX measures market expectations of near-term volatility with S.& P. 500 |Source: Thomson Reuters

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