The biggest lesson investors learned in 2017

Ignore the noise.

If the market was defined by an almost eerie calm for most of 2017, the headlines we all seem unable to ignore were defined by a chaotic, cacophonous first year for the Trump administration.

And yet focusing too much energy on the noisy headlines coming out of Washington, D.C. would have been a mistake for investors who, in the end, enjoyed one of the best runs since the financial crisis.

So if our markets story of 2017 is that returns were great while the news seemed like a nightmare, the investing lesson is to tune all of that out.

As we noted late last year, missing the best days of the decade in the S&P 500 hurts returns in a major way. Trying to get in and out of the market at the right time ends up hurting your ego and your portfolio. Those investors who feared Trump missed a 20% return in the benchmark U.S. stock index.

Donald Trump’s first year in office saw a big run in the stock market, and Wall Street thinks 2018 will be a repeat.
Donald Trump’s first year in office saw a big run in the stock market, and Wall Street thinks 2018 will be a repeat.

And after a 2016 in which markets appeared to locked into the kind of choppy, frustrating pattern that had prevailed for all of 2015, investors saw equity markets unleash to the upside after President Donald Trump’s surprising election win. So while the Trump administration brought with it economic uncertainties, in the end Trump did none of the things market feared most and passed the one idea it liked best — tax cuts.

The final days of 2016 were spent positing whether or not the Dow would top 20,000; we are now on the cusp of the blue chip index hitting 25,000 (a number we posited would be reasonable for the index to hit by 2019 last year).

The beginning of 2017 was spent fretting over whether the Trump administration would send a record-high stock market plunging. Now, Wall Street is calling for another year of double-digit returns in 2018 and Trump won’t stop bragging about how great the market is doing.

Trump’s election led many economists to argue that a recession was nigh. Now, some expect we’ll make it to the 2020s before an economic downturn in the U.S.

Meanwhile, the explosion in cryptocurrencies and the wild ride that bitcoin (BTC-USD) has been on captured the attention of non-investors and Wall Street bigwigs alike. Investor appetite for volatility is not gone, but in 2017 this action found a home outside of the equity markets.

Yet if the story for markets in 2017 is that things went up and to the right in what looks from here like a straight line, don’t forget that this just retrofits a narrative on a year that oftentimes felt like it might go the other way.

Entering 2018, then, it’s worth keeping in mind that what we think happens next probably won’t, and that what does happen in markets will surprise us. And that no matter what, it will all be loud.