James Penn’s latest Business View column:

Just over a year ago, on November 9, 2016, President Donald John Trump was declared the 45th President of the United States.

Liberals the world over are still, no doubt, reeling from the shock, but what a year it has been in stock market terms!

The S&P 500 index has returned just over 20 percent in capital terms (at the time of writing on Thanksgiving Day), or 22.6 per cent including dividends.

Returns from other major US equity indices have been equally impressive.

The Nasdaq has returned 33.5 per cent, the Dow Jones Industrial 28 per cent, the Russell 2000 Small Cap index 23 per cent.

Overall, 2017 has been the best year for the US stock market since 2013, something the new President has not been slow to claim credit for (bragging about things like this would have been ‘infra dig’ in previous decades, but now seems to be de rigueur in the age of Twitter).

Looking back, the stock market got it right.

The thinking was: ‘He may have some slightly barmy ideas, but these may well be rhetoric to get himself elected, and will probably be dropped afterwards; Republican Presidents have generally been good for the stock market and this one probably won’t be an exception, particularly if he manages to get some tax cuts through.’

This turned out to be spot on.

Those who took a bearish view, partly as a result of an antipathy to the man himself, lost out.

According to newspaper reports at the time, investor George Soros made losses of $1bn as a result of ‘wrong bets’ on the markets ( long US Treasuries, Short US Dollar, Short US equities). Not liking someone doesn’t necessarily translate into the logic of making a bet against them.

In contrast, the bond markets got it wrong – the big rise in bond yields in November 2016, as investors factored in infrastructure spending, and a big increase in US trend growth, turned out to be a miscalculation, and yields have declined since January).

Looking back further, the gains are even more impressive.

The S&P has risen four and a half fold since bottoming in March 2009, the Nasdaq Composite more. The Nasdaq has taken out its previous peak in March 2000, and is now over 60 per cent above that level.

There have been a few dips along the way: markets dropped after Trump’s Budget speech in March, then after the failure of the first attempt to reform Obamacare, then during a particularly bad hurricane season in September.

But generally the US stock market has had the perfect chart – a nice straight line with deviations around a narrow channel.

Looking at the long term graph for the Nasdaq Composite is interesting.

A strong bull market from the end of 2011 ended in a correction in mid-2015 (caused by China and Emerging Market slowdown), followed by a resumption of the bull market in January 2016.

Except the gradient of the graph has steepened in this second run. The angle of the first phase was about 20 per cent; the angle of the second phase has been more like 30 percent. It hasn’t yet gone parabolic (which can be a sign of euphoria – usually a killer end to a bull market), but can it keep going at the same rate?

Try to square this within the traditional framework of economic cycles, and things look more difficult.

Cycles have tended to last no more than eight years, and we are now into the eighth year of the upturn. That would suggest an end is in sight… er, next year!

Cash rates are still nowhere near high enough to provide a clear and obvious alternative to equities, even in the US where they are at their highest in a decade.

Inflation remains – almost incredibly – benign, even with unemployment rates near or below NAIRU (non-accelerating inflation rate of unemployment).

Has the old economic cycle been abolished? Who knows? Fund managers have been taught – through years of bitter experience – not to utter the dread words ‘It’s different this time.’

There may be further to go in this cycle, but could it be wise to take – at least some – money off the table?

The opinions stated are those of the author and should not be taken as investment advice. Any recommendations may not be suitable for all, so please contact your financial adviser for further guidance. The value of investments can go down as well as up.