08 Jan Shooting Fish in a Barrel?
Wow, 2017 turned out to be quite a year! All the major indexes recorded gains of over 20%, hitting all-time record highs while volatility was hitting an all-time record low. A new record was set for the number of consecutive days without at least a 3% correction and all twelve months were positive! There were record inflows into low-cost, unmanaged index funds and ‘Bitcoin’ gained 1,300% … really?
We also had lots of good winners – Apple +46%, Diageo +40%, Alphabet-Google +36%, Federal Express +34%, Cabot Oil & Gas +25%, Citigroup +25%, J.P. Morgan +24%, Costco +22%, Berkshire Hathaway +22%, Rolls Royce +20%, Nestle +20% and Phillips 66 +17%. A few modest winners: Gold Miners Index +11%, Coca Cola +11%, Wells Fargo +10% and Schlumberger +6%. A couple of break-evens: Starbucks +2.5% and Whirlpool +1.5%. Two modest losers: Cameco -10%, Exxon -7% and two disasters: Range Resources – 39% and General Electric -44%. We have since sold all the Cameco, General Electric and trimmed the Range Resources in taxable accounts.
In short, 2017 was a great year to be in stocks, a lousy year to hold cash and a tough year to buy the dips.
We have come a long way since the lows of 2009 (+300%) yet the market still shows no signs of letting up (we are overdue for a pullback). While most stocks are on the high side – thanks to near record-low interest rates and consumer confidence – valuations, in general, are not ridiculous. Things might get more interesting in 2018 if the Federal Reserve continues to hike interest rates or risk behavior accelerates. So the plan is the same as last year – stay the course and look to trim holdings if things get silly on the upside or add to positions if the price makes sense on the downside – sounds simple enough.
As always, thank you for your confidence, friendship and business.
Happy New Year,