“Not a creature was stirring, not even a mouse” – Clement Clarke Moore


With a strong earnings season behind us, economic data continuing to trend in a positive direction, and Republicans getting closer to passing a tax reform bill, there has been little to stir the pot of equity market volatility.  Add in the fact that we are entering what is called a “seasonally strong” period for the market, where consumers are more apt to spend and year end contributions hit 401k balances, it seems likely that not only will the market close 2017 on a positive note, it will also do so without the “typical” correction that occurs in any given calendar year.

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The chart above highlights the calendar year return for the S&P 500 along with the intra-year decline for the index.  In essence, it shows that markets have generally closed each calendar year in positive territory, but have also experienced, on average, a 14% decline in any given calendar year.  The market rewards investors who are patient, but it does test their mettle on a regular basis.  2017 has been the exception to that rule, with the market only experiencing a 3% correction this year, so far.

By no means are we complaining about experiencing little volatility.  We prefer that things do not go bump in the night!  However, it is fair to caution investors not to become complacent, or think that they should press their stock market bets to the upside.  The economy usually slows down a bit in the first quarter of each year and there is a potential for the same to happen as we start 2018.

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During the current economic expansion, Q1 GDP growth has averaged 1.2% vs. a 2.4% average growth rate in all other quarters.  A few missed data points of growth, combined with the Federal Reserve reiterating their call to raise rates four times next year, could result in the long-awaited market correction that failed to materialize this year. This is not cause for alarm, but rather something to be cognizant of as we close the year and start a new chapter.


End of The Year

The end of the year tends to be a time of reflection and review so I thought I would spend a few moments writing about what happened at our firm in 2017. Clearly the most significant development was the addition of two new partners, Tim Hussar (our Chief Investment Officer and author of the note above) and Clark Stossel (Director of Client Relations). By now most of you have had the chance to either meet them or talk to them and have discovered that these are accomplished professionals. The added depth of their experience and enthusiasm for our business will be a benefit for all of our clients in the years ahead.

The investment advisory business is changing quickly, primarily due to the explosion of technology. It is our objective to use better technology to help us as we make decisions for our clients and how those clients have access to information. What we don’t believe is that an algorithm can replace human interaction and communication.

I hope everyone has a peaceful and healthy holiday season. Thank you for your confidence in us.

Frank Rutan