4th Quarter News
We admitted in our October newsletter that we failed to predict the stock market surge of 2017. We take consolation in two thoughts. First, 9 out of 10 Wall Street prognosticators also did not foresee the dynamism of the market. Second, to borrow from Yogi Berra, it is tough to make predictions, particularly about the future. On many levels, 2017 was especially difficult. But, excuses aside, we owe our clients explanation of what did occur in 2017 and what we think about the outlook for 2018. This assignment is challenging. The Dow Jones passed the 25,000 mark on January 4 – only 23 trading days after passing the 24,000 mark. The New York Times was prompted to write this headline: “After Dow 25,000, the Party Has to End. But When?”
We are more positive than a year ago. We do not think the party will end in 2018. The party may quiet down – but not come to an end. The fundamentals of economic and corporate earnings growth are extremely strong. These fundamentals temper the argument that stock prices are overvalued. Plus, we accept the concept of “market melt-up” – referring to the momentum of investors rushing to catch the rising tide.
Our clients know we are active managers who focus on stock selection. We help clients to define risk tolerance and then achieve market gains. In that context, we are cautious but optimistic about 2018. We anticipate a market environment where we can find stocks with reasonable value and potential for our clients.