Global Markets Remain Immune To A Year Of Political Volatility

Dec 30, 2017
Originally published on December 30, 2017 5:42 pm
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RAY SUAREZ, HOST:

No way around it - 2017 was a great year to own stocks. The S&P 500 index had risen almost 20 percent over the year. And the Dow Jones Industrial Average is up 25 percent over the same period, buoying portfolios, dividends and retirement accounts. And it's a similar story around the world on financial markets in Japan, Hong Kong and the United Kingdom. All this happened despite a wave of political turmoil in the U.S. and around the globe. To find out why 2017 was such a bull year, we're joined now by NPR senior business editor Uri Berliner. Hi, Uri.

URI BERLINER, BYLINE: Hey, Ray.

SUAREZ: Well, look, I could just make a list a mile long of places in the world that are tense, on the verge of war, causing instability. What's going on here?

BERLINER: Well, you know, despite all this tension and political volatility and geopolitical uncertainty, it actually was a good year for the global economy and remarkably kind of a stable one. Corporate earnings were very strong. Inflation is in check. Sort of the sense that the financial crisis of 2008 is really behind us now. I think economies around the world felt that more confidently. And every single country, every major developed country grew last year which is a remarkable thing. It just doesn't happen that often.

SUAREZ: When you line up 2017 with other years, is there another time things were this good?

BERLINER: Well, really, you know, since the end of the financial crisis, the stock market in the U.S. has just been on a roll. It's had a number of really good years. In 2009, the S&P 500 was up more than 26 percent. In 2013, it was up more than 32 percent. So stocks have had a lot of good years but this was especially notable, this one.

SUAREZ: We have a U.S. president who is unpredictable and sometimes makes policy and announces it on Twitter. We have Venezuela on the edge of a true meltdown, North Korean regime setting off missiles that fly over the airspace of one of the world's other great economies, Japan. And yet, nothing seems to put a dent in the steady growth of the indexes.

BERLINER: Well, I think a lot of this just has to do with corporate earnings. I mean, markets look at corporate earnings very closely. This is really their bread and butter. And, you know, companies throughout the U.S. - technology companies, all kinds of companies - posted really stellar earnings. And there was strong earnings growth overseas as well. So, you know, I think this market has just looked at a - an unusually stable year economically despite, and in spite of all craziness, all the turmoil, all the threatening situations around - the world the volatility and the fear in the economy just wasn't there.

SUAREZ: If you're one of the half of Americans who own stock, that's unquestionably good. What about if you're one of the half - the other half - that don't own stocks?

BERLINER: Right, exactly. As you said, you know, half of Americans own stocks. And for them, it was a very good year. And to some extent, if those people feel wealthier, they may spend more. That's called a wealth effect. That may boost the economy a little bit. But those people who don't own stocks, they don't benefit directly in any way from this big year in the stock market. And even those who do own stock, they're really concentrated mostly among people who are wealthy - six-figure earners, seven-figure earners. Those are the people who own most of the stock in the U.S., and even those who own some, many of them don't own that much.

SUAREZ: That's NPR's Uri Berliner. Thanks a lot, Uri.

BERLINER: You're welcome, Ray.

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