DOMESTIC STOCK MARKETS FINISH 2017 STRONG
Stock market investors were handsomely rewarded during this past year with more than average compensation for their risk appetite. All three major domestic stock averages zoomed past historical returns with the NASDAQ Composite leading the way with a 28% return. The Dow Jones Industrials were not too far behind with a return of 25% while the S&P 500 trailed with a return of 19%. For the first time in history, the S&P experienced positive returns in every month of the year. The Technology, Materials, Consumer Discretionary and Healthcare sectors all outperformed in 2017, with returns greater than 20% for the year, led by Technology up 38% in 2017. The Energy and Telecommunications sectors were negative in 2017 and greatly underperformed the overall stock market.
Bond yields toward the long end of the yield curve ended the year very close to where they started the year. The 10-year Treasury did not change very much in yield year-over-year and the 30-year Treasury bond yield went down by 0.32% during 2017. While the long end of the yield curve (the 30-year Treasury bond) came down in yield during 2017, the short end of the curve (less than 10-year maturities) increased in yield. This created a flatter yield curve, in that short-term interest rates increased while longer-term interest rates decreased. The 10-year Treasury was essentially a fulcrum with the short end moving up in yield, the long end moving down in yield, and the 10-year Treasury staying basically unchanged for the year. What does this mean for bond investors? As interest rates rise, the value of a bond investment decreases. The inverse is true if interest rates fall – the value of the bond investment increases. We believe rates will continue to be traded in a tight range moving into 2018, unless we see something geopolitical which moves interest rates quickly downward in a flight to safety response. While The U.S. Federal Reserve has discontinued qualitative easing programs and started to increase interest rates, much of Europe and Asia are still attempting to assist their economies with lower interest rates to spur economic growth. As long as these monetary policies exist in other countries, there is little reason to expect much higher long-term interest rates in the U.S.
Geopolitical issues still dominate the headlines. North Korea has continued to test missiles causing concern worldwide. The Republican led Congress, along with President Trump, was able to pass tax reform legislation before the end of the year. This was the first major political triumph of the Trump administration. Next, they have stated they will turn to a revamped Infrastructure program. All of this precedes critical mid-term elections where the Republican Party will attempt to maintain their majority in both the House and the Senate.
It was a great year to be an investor, not only in U.S. equities, but many areas worldwide outperformed their historical averages. This year carries lots of momentum into the beginning of the year because of the success of tax reform and expected increases in the bottom line of many U.S. corporate entities. Expectations may begin to weigh on the markets at some point in the near term. There has not been a 5% decline in the domestic stock market in the past 23 months. This is an extended period of time without a meaningful decline. Corporate earnings, usually the bedrock of stock analysis, have continued to be strong and should stay that way with low unemployment numbers and a lower interest rate environment. Corporate tax reform will only assist U.S. corporations in adding to the bottom line with a reduction in their corporate income taxes. Also, consumers should see an increase in their disposable income and support the U.S. economy with those extra dollars.
Past performance is no guarantee of future results.
PSB&T Trust Division: Always Looking Out For You
TRUST & ESTATE SERVICES
When you create a well-rounded estate plan, you will usually create a trust or will along with a power of attorney for financial matters. At some point, you will become unable to manage your own affairs, whether due to disability or death. When that happens, you will need someone else to succeed you – to step into your shoes to ad-minister your trust, execute your will, or serve as your attorney-in-fact under your power of attorney. It is critical that whomever you choose would have the time, the desire, and the expertise to do the job well.
It is rare for family members or friends to have the requisite qualifications — but the Trust Division of Park State Bank & Trust does. We can serve as the successor trustee of your trust, executor of your will upon your passing, and if you become disabled, we can serve as your attorney-in-fact under your power of attorney document.
The Trust Division of Park State Bank & Trust provides professional investment management for a broad base of customers. We put our expertise to work to relieve you of the burden of researching, select-ing, and monitoring investments to meet your diverse investment goals. At the heart of our professional investment management is our fiduciary obligation to you — the legal obligation to always act in your best interest.
As part of our fiduciary obligation, we select investments that we believe to be in your best interests, and not our own. This means that we don’t accept any sales commissions, ongoing fees, or perks from any mutual fund companies or other investment providers — fees and benefits that are often buried in the fine print of other companies’ disclosures. We commit ourselves to a hands-on process of monitor-ing investments and re-balancing your accounts to maintain a portfolio that is suited to your needs.
The Trust Division of Park State Bank & Trust takes pride in being a local trust department with the ability to offer personalized retire-ment planning services to individuals.
Individual Retirement Planning: Choosing and imple-menting an individual retirement program can be confus-ing and time-consuming. We can help you make the most of available tax advantages, as well as provide in-vestment management to grow your accounts.
Park State Bank & Trust
P.O. Box 9
710 West Highway 24
Woodland Park, CO 80866