For the first time in history – the Dow Jones Industrial Average climbed more than 5,000 points in a single year. So what are the reasons for the record-breaking year.
CGTN’s John Terrett finds out.
Early in the year, it was the so-called Trump effect, the inauguration of a businessman in the White House boosted investor confidence, with someone who might bring business friendly policies to bear.
By the summer, corporate earnings were spurring optimism. One corporation after another turned in quarterly earnings that beat the street. Wall Street lapped it up.
In the autumn, the prospect of tax reform loomed large .The first new tax code in 30 years and a big cut in corporate taxes, slashed from 35 percent to 21 percent. Wall Street smelled more economic growth.
And there was one more good reason to buy: the global economy was doing better too, marking some of the best gains since the 2008 global crash.
“Europe is turning, the emerging markets are turning, and a larger percentage of S&P revenue comes from global sources as opposed to say 10, 15, certainly 20, 25 years ago,” Steven Blitz, Chief Economist at TS Lombard said.
2017 was also a year for IPOs, where companies come to market for the first time.
There was much hype surrounding the technology and social media company Snap Inc., which debuted in March for investors who could see beyond Snap’s comedy filters that make us laugh.
“It can have e-commerce in there. It can have payments in there. Down the road, maybe you can get some gaming in there. So they have two or three levers that they can pull to keep the user base engaged and monetize them,” Santosh Rao of Manhattan Venture Partners said.
But Snap Inc. stock has struggled since its IPO and investors are hoping a recent investment from Chinese firm Tencent, which bought a 12 percent stake, may help stabilize things.
In fact, Chinese companies are choosing to trade in the U.S. more and more.
By the end of 2017, there were more than 160 of them, including Lexin Fintech which began trading at the NASDAQ in late December. A micro-loan tech firm, it aims to use technology to bring Chinese people better, more efficient borrowing.
“The product itself is not that unique. The technology behind the product is where the unique thing is. That’s what makes us different from others,” Craig Zeng, Lexin Fintech CFO said.
It was the so-called FANG stocks that were the big stars of 2017. Facebook, Amazon, Netflix, Google, but not forgetting Apple and Microsoft are some of the most exciting companies in the world. Investors wanted in on their futures.
At year’s end, everyone’s hoping the party will continue, but there’s really no way of being sure. Some say corporate tax cuts will keep the party going. Others warn economic headwinds are just around the corner. They worry the stock run-up is a bubble soon to burst.
But the era of Trump has ushered in uncharted territory. All the old norms seem not to be true anymore, so when it comes to stock buying, the old trader adage remains as true today as ever: buy low, sell high.