Stocks Are on the Verge of the Best Year Since 1997

The world is enmeshed in a trade war. The president has been impeached. The tech industry is under attack from regulators worldwide.The stock market is closing in on its best year in two decades. With only two days of trading to go, the S&P 500 could fare better than it has since 1997. Stock prices have been buoyed by a mere whiff of optimism that the economy — despite occasional hiccups and dire prognostications by so-called experts — will keep chugging along.

Through the uncertainty, investors saw things they liked: Job growth continued, U.S. consumers kept spending, and President Donald Trump’s bluster about the trade war eventually gave way to promises for an early-stage deal with China. “There’s the feeling that everything’s coming up roses,” said Patrick Chovanec, chief strategist at Silvercrest Asset Management. “I think that once we get into the new year and we look at some of these numbers, particularly earnings, whether that bears out is another story.”

“The Fed’s interest rate policy has led to an increase in the debt companies and households are willing to take on,” said Paul Christopher, head of global market strategy for the Wells Fargo Investment Institute. Share prices aren’t based only on a general set of feelings in the marketplace. Investors look at what a company might earn in the future, how much debt it has taken on and how much extra cash it is likely to be able to distribute to its shareholders. While corporate earnings growth was strong after the 2017 tax cuts freed up mountains of cash, it may start to slow.

By the close of trading on Friday, the S&P 500 was up 29.3% for the year. If it ends higher than 29.6% on Tuesday, this will be the best year for stocks since 1997, when the gain was 31%.

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