As another year came to a close, 2017 marked the 9th consecutive year of gains for the S&P 500 in a bull market that began in 2009. It also ended as the only calendar year in the history of the S&P 500 to never experience a down month. In fact, over the last 22 months (since March 2016) the S&P 500 has only been down 1 month. In case investors are getting lulled into a false sense of normalcy, it is important to remember that over the last 40 years the S&P 500 is normally down about 35% of the time, any given month1.

Corporate Tax Cuts, Just Because.

As Congress raced to get tax cuts passed before the new year, many market observers continued to question whether now was really the time for tax cuts at all. Usually tax cuts are used as a tool to stimulate the economy coming out of a recession, not going into the 9th year of an economic expansion. Furthermore, as the chart below shows, corporate profits as a percentage of the economy (measured by GDP) are at historically high levels.

While the President and those in Congress have argued that these corporate tax cuts will flow into higher wages for the average person, history would say otherwise. Companies do not increase wages simply because they become more profitable, companies increase wages as a necessity to attract workers in a competitive labor market.

As the following chart will show, despite corporate after-tax profits doubling as a percentage of GDP since 2000, median inflation-adjusted household income was essentially flat (and was actually negative for the majority of the period).