State of the Stock Market Analysis for the Week Ending on December 24, 2017 (A Stock Market Year for the Ages 12-24-17)
This is a stock market year for the ages. The Dow gained around 25% for the year, which is amazing given all of the confusion in Washington DC that we saw all year long. The week may have ended on Friday lower, but the major indices ended up with weekly gains of 0.4% for the Dow, and 0.3% for the Nasdaq and the S&P 500. It was one of those quiet and interesting weeks that had stocks ending quietly higher, and a win is still a win. This past year has been calm and cool, but the trend has been upward all year, and few bulls are heading into the New Year complaining. Stealth bull markets are sometimes the best type of bull markets.
New home sales for November rose to an impressive 733,000 rate, and that topped expectations of 658,000 and last month’s 685,000. Housing remains very strong, which is a solid signal as we head toward 2018. Housing was the debacle that occurred in 2008-09, and it is amazing to see this sector booming once again in 2017. Interest rates are still low, and strength in housing is very encouraging for the broader economy. This means that consumer confidence remains positive, and that is a huge plus for the broader economy as we head toward next year. Economic numbers remain strong so the prospects for 2018 look good.
President Trump signed the much-awaited tax reform bill on Friday, which was another plus for the stock market as we close out the year. As we have said, the January moves toward tax reform, infrastructure spending, and deregulation helped start the stock market rally that began in January. It took a year, but the “tax reform” bill was finally signed. It is not a perfect bill by a long shot, but bulls are hoping that it will translate to higher highs in the stock market in 2018. The corporate tax cuts seem to be the big plus for the stock market as we head forward, so we will see what happens in the weeks and months ahead.
We have a three-day Christmas holiday weekend to think about the stock market, so we will see how we close out the end of the year next week. The Federal Reserve raised interest rates earlier this month, and investors gave a big shrug. It is amazing to see how the Fed and interest rates are no longer a big deal. The stock market continues to hover near all-time highs, and a quarter-point hike now fails to register on investors’ minds. The Fed is out of the picture, but it could come back into the picture in a blink. Those near-zero rates have taken rates out of the picture for the past few years, but rates could be back in the picture quickly.
The stock market rally this year has surprised even the most bullish of the bulls, so we will remain cautious as we head toward 2018. The year’s rally was a “gift” in that few saw the rally coming. For all of the political infighting in DC, no one would have said that it would make for a backdrop for a stock market rally. It happened, though, and we can notch that in the record books. The challenge is for this optimism and rally to continue. Earnings, economic numbers, and confidence should continue, which would be great for a stock market that seems ready to head higher.
The Gorilla wishes each and all a Happy Holiday season, and we will be back in action on January second. This great year for the stock market was fantastic, and it surprised the most seasoned Wall Street sages. Have a happy holiday season and enjoy what turned out to be a stellar year for the stock market. The amazing thing about 2017 was that it turned out to be a strong economic year, as well as a great year for stocks. Let’s hope that 2018 can be a good year too. Happy Holidays to all, and let’s toast to a very good year!
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