"I see trees of green, red roses too
I see them bloom for me and you
And I think to myself what a wonderful world..."
-- Louis Armstrong
Yes Virginia, if the strong performance of most major equity markets around the world is any indication, 2018 will not be just a happy New Year but a happier one.
The first week of 2018 tally shows all four major Wall Street equity indices - S&P 500 (+2.6%), Dow Jones Industrials (+2.3%), Nasdaq Composite (+3.4%), Russell 2000 (+1.6%) -- surged to new record highs; so has the FTSE-100 index (+0.47%); the All Ordinaries Index soared to its highest level in a decade (+1.0%); the Nikkei-225 to its best in more than a quarter of a century (+4.2%).
While the Eurozone's major equity market benchmark - the Stoxx 50 index - only managed to climb to a three-week high it's 3.0% return over the first week of 2018 is up there with the rest of 'em big gainers.
Whether these strong returns continue to prevail over the rest of 2018 remains to be seen for it could just be the "January effect" being in effect.
Wikipedia describes this phenomenon as:
"The January effect is the tendency of the stock market to rise between December 31 and the end of the first week in January. There are many theories for why this happens, the main one being that it occurs because many investors choose to sell some of their stock right before the end of the year in order to claim a capital loss for tax purposes. Once the tax calendar rolls over to a new year on January 1st these same investors quickly reinvest their money in the market, causing stock prices to rise."
But this calls to mind that old adage, "so goes January, so goes the rest of the year" - specifically, the first trading week of January as it had done so in 2017.
Equity market returns:
1st week of Jan 2017 Full-year 2017
Nasdaq 2.56 28.24
MSCI Emerging 1.83 27.82
Dow 1.02 25.08
S&P 500 1.70 19.42
Nikkei 225 1.78 19.10
MSCI World 1.69 16.14
All Ords 1.57 7.84
FTSE100 0.94 7.63
Stoxx 50 0.93 5.90
But beyond the positive portents of these market adage and phenomenon, the markets' underlying fundamental underpinnings are clearly supportive.
The synchronised global upswing that started in 2017 is gaining stronger momentum and with it increased corporate profitability, while at the same time monetary policy still remains largely accommodative.
Certainly, there'll be bumps along the way - relatively high valuation; Donald Trump's unpredictable leadership; Kim Jung-on; China's ballooning debt, Australia's property market and record household debt - but this early in 2018, the New Year's looking happier.