We covered some of the key events that happened in 2017. Now let's take a look into what that means for 2018.

The Bull Market

Currently, we're enjoying the second-longest bull market of the last 100 years. We're not sure how long this will last, and that makes some folks understandably nervous. But one important thing to remember is this: bull markets don't die simply from old age.

Valuations are above historical averages, but this doesn't mean they're particularly concerning. Why? Because of tax cuts and interest rates. With tax cuts boosting earnings for most companies (though not yet fully reflected in analyst projections), valuations are not especially frightening.

Also of concern to some is a flattish yield curve, which historically have been precursors for recessions and declining stock prices (i.e. flat or inverted yield curves). Longer-term rates remain stubbornly low. But today, low corporate bond yields are providing cheap financing for most publicly traded companies.

We don't see signs of economic slowdown or anything that may impact the availability of credit/liquidity, which typically are the enders of bull markets.

Shrinking Supply

So as the money pouring into stock funds are sourced from things like 401k and pension fund contributions, or bonuses getting invested, it is spread among fewer stocks and fewer shares, making those shares more valuable. While it's impossible to know this trend's full impact or how long stocks will benefit, a reduced supply could be a powerful bullish force.

Global Outlook

U.S. stocks have dominated their international counterparts in this bull market, which resulted in higher valuations. The forward PE of the MSCI US Index is 19, while the forward-looking PE of the rest of the world is 16, according to MSCI, and on an even playing field, that makes international stocks more attractive looking ahead. As always, we strongly believe a strategic allocation to each, and a disciplined approach to rebalancing gives the best chance for long-term success.