Investors have had a great time for most of 2017, as major market indexes broke records on multiple occasions and are on course to create new annual records.

Earnings for the S&P 500 increased in each of the last three quarters, with the index likely to report more profits in the October to December time frame. The prime factor backing this extended gain is robust economic growth.

On the flip side, the market witnessed occasional losses. Geopolitical concerns, particularly those related to North Korea, hurt the market on several occasions. Also, there was much speculation about the likelihood of tax cuts receiving legislative approval before they were finally signed into law last week.  

With expectations that the Trump administration will continue to back the market, aiding it to reach many more milestones, stocks that failed to stand out in 2017 have a chance to outperform in 2018.

S&P 500 Shines in 2017

Year to date, the S&P 500 has rallied 20.1%, thanks to impressive economic growth. Per the Commerce Department’s third estimate, the U.S. economy expanded 3.2% in the third quarter. This represents an improvement from the annualized growth rate of 3.1% in the April to June period and the strongest performance since the first quarter of 2015. Moreover, the latest figures represent the best back-to-back quarters of at least 3% growth since 2014. Impressive spending for businesses primarily backed the improvement in Gross Domestic Product (GDP) figures.

Investors should know that the S&P 500 index witnessed steady growth in earnings over the last three quarters, and will likely record earnings growth in the fourth quarter as well. Per our report, the index garnered a total of $277.3 billion, $293.4 billion, and $303.2 billion in the first, second, and third quarters, respectively. For the October to December quarter, we expect higher earnings for the S&P 500 of $310.9 billion.

Tax Cuts & Infrastructure Spending May Drive Growth in 2018