In 2018, keep an eye on 9 market disruptions that didn't happen in 2017

Many of the assessments of the 2017 financial markets understandably focused on the impressively favourable outcomes delivered by stocks and other risk assets. Yet it is also worth considering what didn't happen -- in particular, nine events, which, by not taking place, contributed to make the last 12 months exceptional for many investors, big and small.

Superlatives have been, and should be used, to describe stock-market performance in 2017. Rewarding overall returns, including gains of 25 per cent for the Dow Jones Industrial Average and 19 per cent for the S&P 500, came wrapped in extremely low volatility. The VIX, the most-widely followed measure of market volatility, registered nine of its 10 lowest levels last year.

The series of record highs during the year -- 71 for the Dow alone -- was accompanied by very few episodes of market retracement. And the rare times these occurred, they were comfortably limited in size, duration and scope.

Overall, the Dow rose nine months in a row, the longest streak since 1959; the S&P delivered positive returns every month of the year. The powerful performance of stocks was not limited to the US. A few international markets did better, including an almost 40 per cent return on Hong Kong stocks, and the MSCI ACWI (excluding the US) index returned a solid 24 per cent.

Adding to the good news for investors, the cost of risk mitigation associated with the traditional 60/40 stock/bond investment portfolio was de minimus, and even non-existent with a diversified fixed-income approach. In another unusual twist, both stocks and bonds delivered positive returns.
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