LOOKING BACK. LOOKING FORWARD: INVESTMENT IMPLICATIONS OF THE NEW TAX LAW

Looking back, 2017 was remarkable for it's breadth of expansion including housing, manufacturing, consumption and services and the lock-step participation of global economies, coupled with low inflation, a tightening job market, an accommodative Fed policy and historically low volatility. Returns for the year include the S&P +19.42%, the DOW +25.08% and NASDAQ +28.24%. Milestones include the Dow setting 71 all-time highs, hitting five 1,000-point milestones in 2017 (representing the largest number of such milestones within a calendar year in the benchmark's 120-plus-year history), the S&P notching 62 record highs and NASDAQ crossing the 6,000-point mark for the first time. Globally, 94% of countries are generating positive economic growth year-over-year and 61% of those countries are experiencing acceleration of year-over year growth.

On December 22, 2017, the 2017 Tax Cuts and Jobs Act was signed into law. The complex 1,000-page bill features the most sweeping U.S. fiscal overhaul since 1986 with changes that are intended to spur economic activity through a reduction in both individual and corporate tax rates and to simplify the tax code. The law has important implications for major corporations, small businesses and individual taxpayers. The reduction in the corporate tax rate from 35% to 21% combined with businesses' ability to fully expense capital expenditures for the next five years are powerful potential tailwinds to profits.

Looking forward, the U.S. expansion, entering its ninth year, has a good probability of becoming the longest expansion on record. Stocks had already begun to price in tax reform during the fourth quarter of 2017, but we believe the combination of fiscal legislation, improved business fundamentals and a continuation of accommodative Fed policy – coupled with a continued gradual increase in rates-- should sustain momentum in the economy and equity markets in the coming year and potentially beyond.