2017 was a record setting year.
Just a year into President Trump’s presidency, consumers are spending, unemployment is still sinking, the economy is thriving with GDP above 3%, and stock markets are exploding.
In fact, the Dow Jones capped the year with a gain of 25%. The Russell 2000 small cap index soared 14%. The NASDAQ was up 29%, as the S&P 500 tacked on 20%.
And, of course, one of the top stories of the year has been the GDP.
All indicators are pointing to 3%+ growth for the fourth quarter of 2017.
The question now is – can the rally continue?
While some analysts are concerned that stock prices are far too high, we have to remember that when the tax reform bill goes into effect it has the potential to push profits even higher because of the lower corporate tax rate of 21%.
Higher profits should boost the S&P 500 in the New Year, noted LPL Financial Chief Investment Strategist, John Lynch, as mentioned by CNN. Wells Fargo also believes the economy will grow an average of 2.5% each quarter in 2018 and 2019.
Plus, the job market is still healthy. And, as evidenced from record holiday sales, consumers are still spending a good deal of disposable income. "Consumers' expectations remain at historically strong levels, suggesting economic growth will continue well into 2018," said Lynn Franco, director of economic indicators at the Conference Board, as quoted by CNN.
We also have to consider a potential infrastructure plan, which Trump promised.
Fresh off the tax reform victory, Trump has plans to kick off 2018 with a new push for a massive infrastructure program.
"Infrastructure is, by far, the easiest," Trump said as quoted by ABC News. "People want it, Republicans and Democrats. We're gonna have tremendous Democrat support of infrastructure, as you know. I could have started with infrastructure. I actually wanted to save the easy one for the one down the road."
Should the positives and the uptrends continue, the Federal Reserve could be forced to raise rates even more aggressively than before, which could slow the economy and keep it from potentially overheating. However, inflation and wages are not rising dramatically at the moment, so that could put any rate hikes on the back burner.
One thing is for certain – with so much optimism about 2018, we’ll have many more opportunities to share in the next issues of The Cheap Investor.