Global equity markets ended 2017 on a high note. Economic growth was steady across nearly all major developed economies, employment numbers remained strong, and inflation remains low. Despite political uncertainty and diplomatic tensions, equity markets had a great year. Large-cap stocks in the S&P 500 index gained another +6.6% in the fourth quarter to end the year up +21.8%. Stocks of smaller companies, represented by the S&P SmallCap 600 index, also did well. They gained +4.0% in the fourth quarter and +13.2% for the year.

International stock markets managed to keep up with the strong domestic-market performance in 2017. The MSCI Europe, Australasia, and Far East (EAFE) index gained +4.2% for the fourth quarter, finishing up +25.0% for the year. Emerging-market equities did even better, gaining an impressive +37.3% in 2017.

Bonds were modestly positive, with the Barclays U.S. Aggregate Bond index gaining +0.4% in the fourth quarter. As economic conditions continue to improve, short-term rates have risen, while long-term rates have remained low. Inflation is still muted in the United States, which is helping keep rates down.

The Financial Engines perspective.

The year 2017 ended on positive note as global growth continues to improve. Market volatility has remained unusually low in recent months. But this does not mean that risk is absent. Sudden political events or economic turmoil could change market sentiment quickly. It is important to remain diversified to help weather potential storms and reach your long-term goals. At Financial Engines, we continue to monitor market conditions to keep your portfolio allocation on track.

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