With 41 days to go, it seems Christmas has come early this year for many investors.
The returns in 2017, at least for equity investors, are staggering. The DAX is higher by some 16 percent since the start of the year; the S&P 500 has rallied 15 percent with both markets hitting record after record; and previously unloved emerging markets like Brazil have spiked 20 percent.
Driving this is what many call a "sweet spot" for investors: a backdrop of solid growth, low inflation, strong corporate earnings and continuously supportive monetary policy from central banks, despite efforts to gradually tighten stimulus.
On top of that, we are still expecting U.S. President Donald Trump's tax reform to be passed before year-end, which could give another fillip to risky assets, when eventually approved.
As the end of 2017 nears, the question presents itself. Is it time to pack up your portfolio for the year and take the profits or do you chase the rally further into year-end?
According to Larry Hatheway, chief economist and head of investment solutions at GAM, the impressive gains might be here to stay.
In a letter last week, the strategist wrote: "The biggest risk to investors over the remainder of 2017 is an upside melt-up in equity markets. Some regard equity markets and valuations, having made very strong advances in 2017, as stretched. However, momentum is a clear driver in the short run for all markets, including for equities, and there is a sense that we may see a further surge in equities in the final quarter, which many investors may not be prepared for."
The warning from GAM doesn't get much clearer than this – the good times in equities aren't over yet.
And that trend does not seem to be stopping soon, despite the gradual move higher in interest rates, which have historically dampened equity returns — at least, according to Yianos Kontopoulos, global head of macro strategy at UBS.
In the bank's 2018 outlook, he wrote: "2017 is a key example of how yields can rise modestly, P/Es (price earnings multiples) can moderate, and equities deliver strong returns at the same time. As long as it is driven by growth, while inflation does not rise too sharply, we believe it is sustainable."
Evidently, the common worry that most analysts share is the "I" word — inflation. This has been the missing ingredient in the upturn as inflation levels have been stubbornly low across developed markets, confusing policy makers and investors alike.
While the risk of a sudden surge in inflation is low, according to UBS, it might be non-growth related factors, such a spike in oil prices, that could ultimately catapult it higher.
Looking past the threat of inflation returning, and other regularly cited worries — such as high valuations; record low volatility, which is often seen as a sign of investor complacency; and geopolitical events such as North Korea or the upcoming Italian elections — might be a big ask for investors.
But just like the all-too-familiar "Don't fight the Fed" warning, it might just be best to follow the equally familiar "the trend is your friend" mantra. In that case, that Christmas tipple might just taste a little sweeter.