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Most investors are familiar with the term “Bull Run” and many are nervous of the fact that global stock markets appear to have been enthusiastically positive for quite some time now. Equity markets have delivered very strong gains since the first quarter of 2009 and have effectively ignored most of the negative events that happened during a period of tumultuous economic, banking and political developments.

Naturally, the longer the cycle lasts, the more cautious investors are inclined to be. Over the past three years forecasters have been cautious in their predictions for equity market returns, but for the most part such caution has proved not to have been warranted.

During 2017, the S&P 500 gained 20% in local currency terms, the Dow Jones gained 25.6%, the FTSE 100 gained 7.6%, the German DAX gained 12.5%, the French CAC gained 9.3% and the Japanese NIKKEI gained 19.1%. All in all, these represent very solid returns. However, currencies are always potentially volatile and are notoriously difficult to forecast. During the year the dollar lost 12.4% and sterling declined by 4.3% against the euro. These currency movements undermined the returns gained by euro investors in the US and the UK to an extent.

So 2017 was a good year for the global economy and business earnings butnine years into an equity bull run, you could be justified in being cautious once again, as the fact that stock markets have continued in their upward trend in recent months just makes the chances of a correction even more likely. However many of the omens are now suggesting otherwise. Economic fundamentals are the most important driver of investment performance, followed by political developments and corporate performance and all of these factors are currently showing positive and supportive signs for further growth.

Once again forecasters are cautiously optimistic that 2018 is set to be a reasonable year for equity markets, but with the usual caveat of some volatility! We have already seen a fall back in markets over the last couple of weeks and I would still make a note of caution that the markets have been driving ahead since March 2009 and valuations now look a little challenging.

Brexit will once again be an issue over the coming year, and it is impossible to be certain of any outcome in this regard. Other things to watch will be Trump and the mid-term elections in the US in November, as well as Italian politics, where a general election is due in March. However none of these risk factors seem capable of killing global growth and equity markets are reflecting that.

Sean Sweeney, QFA RPA is a Qualified Financial Advisor and Retirement Planning Advisor.You can contact him through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on sean@jfl.ie