Where We Stand: Investing

HERE ARE THE LATEST NUMBERS from the world of investing:

  • The S&P 500 gained 19.4% in 2017, excluding dividends. Since the market bottomed on March 9, 2009, the shares in the S&P 500 have climbed 295%, though they remain just 75% above their March 24, 2000, peak.
  • After lagging in 2016, U.S. big-company stocks sparkled in 2017, easily outpacing their smaller brethren. Similarly, after trailing in 2016, growth stocks trounced value stocks in 2017.
  • Foreign stock markets sprang to life in 2017, climbing 21.8%, as measured by MSCI’s Europe, Australasia and Far East index. The improved performance has been driven, in part, by the dollar’s weakness in the foreign currency markets, which has boosted the value of foreign shares for U.S. holders. The turnaround by international markets has been welcome news: They had trailed U.S. stocks in six of the prior seven calendar years.
  • Emerging markets’ strong 2016 performance continued in 2017, with MSCI’s emerging markets index up 34.4%. Emerging markets’ recent revival followed a disappointing five-year stretch through year-end 2015, during which they broke even in one calendar year and lost money in three of the other four.
  • The benchmark 10-year Treasury note finished 2017 at 2.41%, almost unchanged from the 2.45% at year-end 2016. In early July 2016, the 10-year yield hit a record low of 1.37%.
  • Short-term interest rates remain modest, with taxable money-market mutual funds yielding an average 0.9% and one-year certificates of deposit yielding 1.7%. But matters should improve: The Federal Reserve raised its target for the federal funds rate in March, June and December 2017, and further rate increases are expected in 2018.
  • Real assets had a mixed year in 2017. Oil, which finished 2016 at $54, was $6 higher a year later. Real estate investment trusts posted subdued returns in both 2016 and 2017. Gold, which ended 2016 at $1,151, stood at $1,305 at year-end 2017.
  • In December 2017, the Federal Reserve projected that the U.S. economy will expand 2.5% in 2017, with unemployment dipping to 4.1% and inflation running at 1.7%. For 2018, the Fed sees growth at 2.5%, unemployment dropping to 3.9% and inflation rising to 1.9%. Since the economic contraction of 2008 and 2009, real (after-inflation) gross domestic product has grown fairly steadily. But the pace of growth has been modest, averaging 2.1% a year over the seven years through 2016, including growth of 2.6% in 2015 and 1.6% in 2016.
  • As of 2016, 51.9% of U.S. families were invested in the stock market, up from 48.8% three years earlier, but below the 53.2% peak recorded in 2007, according to the Federal Reserve’s latest Survey of Consumer Finances. The survey is conducted every three years.
  • Figures from the Investment Company Institute show that stock index mutual funds accounted for 24.9% of stock mutual fund assets at year-end 2016, up from 11.4% a decade earlier. Moreover, mutual funds aren’t the only way to index. If you go the indexing route, you can choose between index mutual funds and exchange-traded index funds. Over the past 10 years, index mutual funds and exchange-traded funds that focus on U.S. stocks have together attracted $1.4 trillion in net new cash from investors, even as actively managed U.S. stock funds lost $1.1 trillion.

Want to get a handle on stock and bond market valuations? Check out the chapter on financial markets.

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