After big ’17, 401(k) gains likely to be muted

Stock market moving ‘sideways’ gets blame

Last year was nirvana for retirement investors, but don’t expect a repeat in 2018.

The stock market surged nearly 20% in 2017 and had very few bumpy stretches, despite uncertainty over White House policy, damaging hurricanes, interest rate hikes and a North Korean nuclear threat.

But 2018 has been rockier for the 9year-old bull, even with a stream of stock-friendly news, such as corporate tax cuts, the best corporate profits since 2010 and an easing of tensions with Pyongyang.

“Last year’s 20% return against a backdrop of little volatility was an anomaly,” says Joe Quinlan, chief market strategist at U.S. Trust in New York. “We’re not in the Land of Oz anymore.”

Now, it’s more like Kansas out there. Since the market’s 10% drop in February, the first such dip in two years, the broad Standard & Poor’s 500 index has essentially gone flat — down 1.4% in a year that so far has been characterized by sideways trading and stagnant prices. It is 8.3% below its January alltime high.

The pause in the rally comes as investors question if all the upbeat news on the economy is already reflected in current prices. And with rising interest rates taking hold, threatening to erode corporate profits and make bonds a more alluring investment than stocks, they’re wondering: Is this as high as the market goes?

In a sign that good news is not juicing stock prices as hoped, the S&P 500 has declined 1.1% since the start of a stellar earnings season April 13.

It’s as if investors are ignoring the usual stock boosters. To start with, estimated profit growth for the 500 companies in the large-stock index is more than 25%, the best pace since 2010, according to Thomson Reuters. Add to that bright spot another impressive figure that’s doing nothing for the market: Nearly 80% of companies have topped Wall Street’s profit forecasts so far, according to Thomson Reuters. That puts the S&P 500 on track for its highest “beat” rate since the earnings tracker began reporting that statistic in 1994.

Says Quinlan: “Robust earnings hasn’t been converted into market rocket fuel.”