Q1 2018 Market Preview
As an investment year, 2017 is ending with a continuation of the strength it showed earlier. As of November 28, the DJIA is +19.67%, the S&P 500 is
+16.41%, and the NASDAQ Composite is +27.85%. Clearly this has been an excellent performance year for the major averages. With this in mind, we will examine the implications of this strong performance historically for the upcoming Q1 and all of 2018.
Since 1970, Q1 market averages have been second best among the four quarters across the three major U.S. indices, trailing only Q4. However, in the second year of a presidency, averages are only about half as good. Of note, Energy and Technology are the only two sectors to post negative returns during the 1970- 2017 time period. Given the strong performance both sectors have had recently, a counter-trend move may be possible in Q1 2018. In addition, Consumer Cyclical and Retail, two groups that have lagged YTD but have shown some strength in Q4, tend to perform well in the first quarter of the second year of a
presidency.
