The post-election rally carried on through December, benefitting most equities and capping off a strong year. Bonds also benefitted, ending a multi-month slide, despite the Federal Reserve deciding to increase interest rates in December. We thought it would be interesting to share a few facts relating to the S&P 500 Index’s strong performance in ‘16: a) its 12.0% gain was comprised of 9.5% from appreciation and 3.5% from dividends, b) if you exclude the 3 best days of the year then the gain falls to 4.4%, c) if you exclude the 3 worst days of the year then the gain rises to 22.1%, d) the average annual return over the last 50 years is 10.2%, e) annual returns have been positive 13 of last 14 years, including 8 in a row (9 is the record), and 40 of the last 50 years (80%), and f) over the last 50 years, 53% of trading days have been positive and 47% negative (2016 was 52/48).
- The Federal Reserve increased the Fed Funds rate by 1/4 point, increasing the target range to 0.50-0.75%; additionally, the Fed indicated the potential for three rate hikes in 2017 subject to the economy's reaction to the President-elect's fiscal spending policies
- The U.S. dollar index reached a 14-year high in December as the Federal Reserve raised interest rates for the second time this cycle; dollar strength remains a headwind for domestic exports (manufacturing) and multinational companies with non-dollar earnings
- The European Central Bank reiterated its commitment to supporting the European economy by maintaining its bond purchase program through the end of 2017, though it will taper monthly purchases from €80B to €60B beginning in April
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