Finishing 2017 on a Positive Note

Global equity markets finished the year strong, with major indexes providing mid-single-digit returns in the fourth quarter. Fairly robust economic growth and benign inflation combined with the expectation of US tax reform, fuelled broad gains across both developed and emerging markets. Given low inflation data, central banks prolonged their accommodative stances, adding further support to equity prices. The strong economic backdrop overrode geopolitical concerns that dominated news headlines throughout 2017.

The US equity market led western world markets. Consumer related sectors, as well as the Information Technology and Financial Services sectors, bolstered the fairly broad-based rally. In addition to benefiting from improving consumer and business confidence, these sectors were viewed to be the major beneficiaries of tax reform. On the flip side, weakness in pharmaceutical stocks dragged down the Health Care sector’s performance. Large pharmaceutical companies, which generally already pay below-average corporate taxes, also suffered from anticipated regulatory reform that could affect their pricing power.

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