The S&P 500 and US Treasury Bonds Historical Total Returns by Year: Chart

The US stock and bond market performed very well last year. US equities as measured by the S&P 500 yielded total returns that were well above the historical average and US Treasury bonds also earned above average total returns with a year-end return of 2.1%.

The chart below shows the annual total returns of S&P 500 and US treasury bonds by year fro 1873 ad 1900 respectively:

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Source: Economic and Strategy Viewpoint January 2018, Schroders

The World’s Slowest Growing Economies in 2018: Chart

Last week I posted a chart showing the world’s fastest growing economies next year. The chart below shows the slowest growing economies in 2018 as predicted by The Economist magazine:

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Source:Chart of the Day: The World’s Slowest Growing Economies, Canadian Investment Review

The UK is projected to have low economic growth next year due to the ongoing Brexit issues.

Which Markets Are Cheap For 2018?

Most equity markets have performed well this year with the US market and major emerging markets increasing by double digit percentages. So investors looking to deploy cash may be wondering which equity markets are cheap as we head into 2018. The following table compares the valuation ratio of global markets:

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Source: Which of the major stockmarkets are ‘cheap’ going into 2018? by Duncan Lamont, Schroders

From the above article:

The table above(edited) shows a number of valuation indicators compared with their average (median) of the past 15 years, across five different regional equity markets. A description of each valuation indicator is provided at the end.

Figures are shown on a rounded basis and have been shaded dark red if they are more than 10% expensive compared with their 15-year average and dark green if more than 10% cheap, with paler shades for those in between.

As if a glass of red wine has been spilled over it, the table is stained red. With perhaps the exception of Japan, expensiveness abounds. No market is unequivocally cheap so all come with a health warning.

The US market is the most expensive of all the equity markets. However US stocks have always commanded a premium and investors’ attraction to US equities will continue next year. The Japanese market is the cheapest based on the above table but Japan has been cheap for many years now and investors who rushed into Japanese equities have been disappointed over and over in the past.

Overall investors have to be highly selective in the US market and plenty of opportunities exist in developed Europe and emerging countries.

Why Investors Need Not Fear The Bitcoin Bubble

The price of crypto currency Bitcoin fell below the $15,000 level today. In recent weeks Bitcoin has soared to astronomical levels leading to a bubble. As prices continued to soar with wild swings in between some investors have worried about the bursting of the bitcoin bubble. Some may even wonder about the impact of bitcoin prices crashing on other assets such as equities, bonds, etc. This fear is unfounded. Bitcoin is nowhere in terms of market capitalization compared to the US stock market as shown in the chart below:

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Via Twitter @Lelde Smits

The key takeaway is that investors should avoid all the noise daily in the media around bitcoin and other crypto currencies.