Stocks smoothly ride to a blockbuster 2017

Taken a look at your stock portfolio lately? It’s a good bet it’s racked up solid gains for the year.

Wall Street has taken stock investors on a mostly smooth, record-shattering ride in 2017. The major stock indexes made double-digit gains for the year, led by Apple, Facebook and other technology stocks.

The Standard & Poor’s 500 index, the broadest measure of the stock market, had its best year since 2013.

“This would go in the category of stellar year, with very little volatility in the market and pullbacks that were essentially minor,” said Quincy Krosby, a strategist at Prudential Financial.

Several factors kept the market on an upward grind for most of the year and repeatedly drove stock indexes to all-time

highs. The global economy rebounded, while the U.S. economy and job market continued to strengthen, which helped drive strong corporate earnings growth.

Investors also drew encouragement from the push by the Trump administration and the Republican-led Congress to slash corporate taxes, roll back regulations and enact other pro-business policies. Congress passed the $1.5 trillion tax overhaul bill, which reduces corporate taxes from 35 percent to 21 percent, last week.

Total return

The S&P 500 index finished the year with a gain of 19.4 percent, more than double its increase in 2016. The index notched 62 record highs this year.

Including dividends, the S&P 500’s total return was 21.8 percent, as of late Friday. That means if you invested $1,000 in an S&P 500 index fund at the beginning of the year you’d wind up with about $1,218 at the end of the year.

Other major market indexes also delivered solid gains. The Dow Jones industrial average gained 25.1 percent. The 30company average set 71 alltime highs as it sped from just under 20,000 points to past the 24,000 mark.

The Nasdaq composite did even better and climbed 28.2 percent. The techheavy index blew past the 6,000-point mark for the first time in April.

Small-company stocks, which trounced the rest of the market in 2016, got a boost this year as investors bet that the companies would be big beneficiaries of a corporate tax cut bill. The Russell 2000 index of smaller-company stocks gained 13.1 percent.

The market’s gains have been broad, led by technology, which soared 36.9 percent. Only energy stocks and phone companies took losses for the year.

For the most part, markets overseas also fared better this year than in 2016.

The gains in overseas markets reflect how economies in Japan, Europe, China and many developing nations began growing in tandem with the U.S. for the first time in a decade.

In 2016, S&P 500 companies increased earnings by 0.4 percent. Through the first three quarters of 2017, earnings climbed about 11 percent from a year earlier, said Lindsey Bell, strategist at CFRA Research.

Those stronger earnings are a key reason why the S&P kept climbing, as stock prices tend to track corporate profits over the long term.

Negative headlines

The market rode out many negative headlines in 2017. North Korea tested a ballistic missile for the first time in July. Then, reportedly, a hydrogen bomb in August. Major hurricanes slammed into Texas, Louisiana and Florida. And congressional Republicans’ failed attempts to repeal the Affordable Care Act fueled worries on Wall Street that the Trump administration’s plans for a sweeping corporate tax cut and other probusiness policies would be delayed or derailed entirely.

Still, investors seemed determined to keep the market moving higher. On days when the market pulled back, stocks typically rebounded the next day.

“You had geopolitical risk with regard to North Korea and the saberrattling on both sides caught the market’s attention, but it became a buying opportunity,” Krosby said.

A lot of cash

Traders repeatedly bought back in on bad news in 2017 because they, and corporations, have a lot of cash and don’t see better places to get a return as long as the economy and company earnings continue to improve, said Paul Christopher, head of global market strategy for Wells Fargo Investment Institute.

“People have just been waiting for pullbacks to buy the dips,” he said. “There’s still a lot of cash on the balance sheets of businesses and households.”

By some measures, the market is looking expensive. The S&P 500 is now trading around 18 times forward earnings. That’s above the historical average of 16. Even so, eight years into the bull market, many analysts expect stocks to keep climbing next year.

“We expect the bull market to continue in 2018, but at a more moderate pace,” said Terry Sandven, a strategist at U.S. Bank Wealth Management.