More so than any other year, 2017 will go down as a shockingly optimistic time. Immediately following the equally astonishing and unexpected election victory of President Donald Trump, the futures markets tumbled. How can anyone with zero political experience use the highest office in the land as a testing grounds? From that perspective, I can see why the best investments of 2017 appeared to be put options against virtually anything.
However, the Trump administration enjoyed a few tailwinds that eventually calmed fears. First, the President had the backing of a Republican majority. Second, he was particularly vocal about his pro-business stance, and took initiatives to jump-start the current economic recovery. Third, Trump had the magic intangible of being Trump. He could say and do things with seemingly no consequences, and multiple political leaders (domestic and foreign) simply acquiesced.
A Trump White House wasn’t what most constituents were hoping for. Nevertheless, the financial markets love stability, no matter how it’s acquired. Yes, President Trump can go off the rails, perhaps more times than we would like to see. But there’s a certain predictability to the madness and we’ve largely grown accustomed to it.
Record-shattering market indices proved these points. Strong leadership has its merits, even if we disagree with the content. Furthermore, the deep-seated concerns that Trump would destroy our foreign relations were unfounded. Some of the best investments of 2017 were, in fact, foreign stocks.
As painful as it may be for the left to hear, Trump was at least partially responsible for making stocks great again. Here are the best investments of this incredible year!
Best Investments of 2017: Benchmark Exchange-Traded Funds
It’s unintuitive to call benchmark exchange-traded funds, such as the ubiquitous SPDR S&P 500 ETF Trust (NYSEARCA:SPY), one of the best investments of 2017, or any year for that matter. The SPY is boring, predictable and, especially for young investors, completely uninteresting. Why bother mentioning a fund that has only achieved 16% year-to-date returns?
The reason is that the primary rule of investing is to not lose money; profitability is much easier when you can follow this rule consistently. Investing in the SPY gives you exactly that. The benchmark ETF was first offered publicly in 1993. Since then, the SPY has failed to provide positive returns in only four years: 2000 through 2002, and 2008. Not surprisingly, these years coincided with steep recessions.
But again, the biggest criticism against the SPY is its lack of outstanding performances. Its best year was 1995, when the SPY returned more than 37%. Of course, that was during the insane run-up to the internet stock bubble. Overall, the fund averages 10% returns between 1993 and 2016.
However, five of the last six years have been comparatively phenomenal for the SPY. Thanks to this robust bull market, investors can substantially reduce their risks, and still make respectable profits. Who says you can’t have your cake and eat it, too?
Best Investments of 2017: Chinese Stocks
Call me an old school capitalistic pig if you want, but I’m simply not a big fan of communist governments. While the U.S. has plenty of problems, at least we attempt the pretense of fairness and transparency. That’s not how things roll in China. Nevertheless, one trend exists that I cannot deny: Chinese stocks have been among the best investments of 2017.
Take a look at internet and e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA). Despite lingering questions about its financial reporting and business practices, BABA stock is up an extraordinary 118%. As gear-heads like to say, “there’s no replacement for displacement.” In other words, performance is the ultimate arbiter, and Alibaba has so far exceeded all expectations.
Next, consider the case of Weibo Corp (ADR) (NASDAQ:WB). WB stock is one of the best performing Chinese stocks, up over 189% YTD. Over the trailing six-month period, Weibo has gained 56%, while in the past 90 days, has gained 20%. Momentum remains strong, and it could take this company even higher.
But what’s particularly brow-raising is that Weibo is a social media platform. That’s a mighty big risk considering that the Chinese government is no stranger to free-speech censorship. Weibo is like a Toyota Motor Corp (ADR) (NYSE:TM) opening up a factory in Detroit. Some things you don’t do, yet Weibo makes it happen.
Perhaps it’s the magic of Chinese stocks, which were one of the best investments of 2017.
Best Investments of 2017: E-anything!
During Amazon.com, Inc.‘s (NASDAQ:AMZN) early years, critics complained that the upstart company wasn’t profitable. Now, the criticism is that AMZN stock has gone up too far, too fast. After flirting in and out with the psychologically important $1,000 level, shares are currently chasing $1,200.
If you think that’s crazy, you may want to hold onto something. It wouldn’t surprise me at all if Amazon shares make a run for $2,000 in 2018. E-commerce is a relatively new phenomenon, yet it is completely disrupting the way we consume products. Moreover, the trend is likely to strengthen, not decline.
But Amazon isn’t the only digital behemoth that investors doubted. Several analysts questioned whether Netflix, Inc. (NASDAQ:NFLX) could continue returning value for shareholders. Despite severe choppiness, NFLX stock turned out to be one of the best investments of 2017, up 58% YTD.
Simply put, the digitalization of everything meant that investing in the broader technology sector was a high-probability bet. Boring Microsoft Corporation (NASDAQ:MSFT) was a big winner for shareholders thanks to cloud computing. Nvidia Corporation (NASDAQ:NVDA) is up triple-digits in 2017 due to wide-ranging businesses, including driverless-vehicle technologies. Even Tesla Inc (NASDAQ:TSLA), which has taken a dip recently, has gained a very respectable 48% YTD.
Digitalization is the future. As such, attempting to call market tops in this sector has usually proven quite painful.
Best Investments of 2017: Bitcoin
In the recent past, the Dow Jones Industrial Average’s rally has been labeled “the most hated bull market.” But no other sector is as hated as Bitcoin. Forget classifying cryptocurrencies as one of the best investments of 2017; Bitcoin is the best, period.
At the beginning of this year, Bitcoin took a peek a hair above $1,000. Little did we all realize that the original digital token would jump to over $9,500. At this price point, $10,000 Bitcoin would be less than a 6% move away. I told you that such a milestone wasn’t so crazy. Heck, we might even see it before December rolls around!
Many analysts are freaking out about Bitcoin prices, saying such extreme levels are unsustainable. But hold on! Bitcoin and its underlying blockchain technology could become a truly global currency and a store of wealth. Furthermore, the value of all outstanding Bitcoins is only about $142 billion. That’s a drop in the bucket compared to the circulated value of fiat currencies.
One of the critical attributes that Bitcoin critics miss is that cryptocurrencies help eliminate artificial hegemonies. Bitcoin can be broken down into minute denominations. Whether someone wants to invest a dollar or a million dollars, all transactions are accepted. Furthermore, Bitcoin trading is open to anyone, anywhere.
Bitcoin is the ultimate disruptor. We often fail to realize that the traditional stock market is unquestionably elitist, and perhaps subtly discriminatory. With Bitcoin, we eliminate all classes, borders and other barriers. What’s left is an open-source platform that belongs to both everyone and no one.
Josh Enomoto is long Bitcoin.
