NEW YORK (CBSNewYork) — Defying speculation the market would take a slide during President Donald Trump’s first year in office, it has continued to set new highs.
What is the driving force behind the yearlong surge, and can it continue well into 2018? CBS2’s Dick Brennan stocked up on answers Thursday.
“Should you take your profits and go home?” said market expert Barry Habib.
Indeed, that is the big question after a year that saw the S&P 500 Index rise 20 percent and the Dow Jones Industrial average up 25 percent.
“It is now the second longest bull market on record,” said CBS News Business Analyst Jill Schlesinger.
This all happened despite a gloomy prediction from some analysts at the beginning of 2017.
So what has been driving this raging bull?
“I think the big propeller this year is really about this global growth,” Schlesinger said. “It happened all at once around the world — corporate profits rising, much stronger than anticipated.”
Couple that with anticipated corporate tax cuts, deregulation, and a growing gross domestic product, and Habib said the economy just took off.
“It had gone a long period of time without 3 percent GDP growth, and it looks like we’re about to either approach that or break that level,” he said. “Presidents have some effect, but the economy is really what makes the stock market boom, more than Washington.”
Corporate economist Robert Frick said by all indications, we can expect this strong economy to continue through 2018.
“The unemployment rate is so low. The number of jobs per household is going up, so household income is up, a lot of people are spending. They feel confident,” Frick said.
Another reason to feel confident is that interest rates are also expected to rise this new year.
“Which means that savers, who have been kind of plagued by low interest rates on their CDs and their money markets and their savings accounts — now all of a sudden, they’re going to start getting better rates,” Frick said.
But Habib warned that it won’t last forever.
“So yes, it can keep going and it can keep going longer than we ever thought, however, the music does tend to stop,” he said.
And while none of the experts CBS2 spoke to think it will come to a screeching halt, the stock market could be in for a bit of a correction.
“Anything can stymie the progress of a stock market rally, especially this far into it,” Schlesinger said.
But there is one very important thing you can do to protect yourself.
“Make sure you have a good, diversified portfolio,” Frick said.
“We love diversified portfolios,” Schlesinger said.
“I think diversity is very important,” Habib added.
That means you should not have all your weight in the U.S. stock market. Spread the wealth in foreign markets, bonds, and smaller companies.
And perhaps most importantly, Schlesinger said: “Please don’t invest unless you have a game plan — have I paid down my credit card debt? Do I have enough money in my emergency reserve fund, six to 12 months?”
All experts agree that having a liquid emergency fund is key. It can give you the security to invest in the market.