For the 54 percent of American households with money in the stock market, 2017 has been a very good year. Not the best, but very good by historical standards.
In the week ahead, the S&P 500 is on pace to finish this year higher by 20 percent. It’s an above-average return for shareholders.
It would be the best year for stocks since 2013 and the second-best year since the market collapse in 2008.
What are the lessons of the continued rally?
First, hope triumphed over fear – hope for President Donald Trump’s economic and regulatory positions such as a lighter touch with banks and, of course, the recently passed tax legislation cutting the corporate tax rate.
Despite all the bluster, boasting and bullying (and that just covers the presidential tweets), stock buyers continued voting with their money.
Second, fear can run and hide for a long time. Fear, in stock market parlance, is volatility. That is code for a sharp sell-off. The last time the S&P 500 went so long between dropping 3 percent in a day was during the mid-1990s stock market run-up.
Investors put aside concerns over the Federal Reserve raising interest rates, North Korea, the ongoing investigation into the Trump campaign and Russia, Brexit and a host of other challenges to fuel the smoothest stock market since the mid-1960s.
Third, predictions are pointless. It is price that counts. Seriously, investor expectations of the future can be seen in the price they are willing to pay for stocks.
A year ago, Bank of America Merrill Lynch warned about the “potential for big market swings” in 2017. Citi called for a “reasonable” rally in 2017, but “not outstanding.”
Generally, predictions for 2017 were right on direction (up), but wrong on magnitude.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.