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Market Flash Report - January 2018

The past twelve months were historic for the S&P 500 Index, marking the first calendar year since 1926 when every month experienced a positive total return. In fact, there has not been a negative monthly total return since October 2016. The Federal Reserve increased short-term rates at their December meeting (the range for the Fed Funds rate is now between 1.25% - 1.5%), a move highly anticipated by investors. This marks the fifth increase in the past two years. At the same meeting, Fed officials also increased their GDP expectations for the coming years. President Trump signed off on the Tax Cuts and Jobs Act, passing the tax reform promised during his presidential campaign. Two key changes from a corporate standpoint are lower tax rates for corporations (from 35% to 21%) and a one-time tax on the repatriation of overseas earnings. Lawmakers are hopeful the reform will provide a boost to investment spending and increase wages for workers. The reform should provide a modest tailwind to corporate profits. International equities had strong returns in 2017 as well with U.S. investors benefitting from a weakening dollar. The rebounding global economy is expected to continue to strengthen into 2018 with synchronized growth across all regions. International and Emerging Market equities remain more attractively valued compared to their U.S. counterparts.