5. The GOP’s Unity Woes
It is easy to point at the Democratic National Committee (DNC) and see dysfunction. But here’s reality. The Republicans have held power in Congress for nearly a year and the progress on policy change has not held the fervent pace of 2009 under the Democrats’ healthcare and Dodd-Frank run. The repeal of Obamacare failed, and now we have Republicans defending the Affordable Healthcare Act against liberal calls for single payer. Tax reform has not gone smoothly, and there have been few reports that infrastructure spending is on the way. The Republicans are a house divided ahead of a very consequential 2018 House race. It’s a good thing for them that they are facing an equally dysfunctional and divided party in the year ahead.

8. Biggest Market Shock: Cboe Volatility Index (VIX) closes below 10 on 38 occasions in 2017.  Under 10 (how many days in 2017?)
The lack of volatility in 2017 has not been seen in decades. This is the trade that everyone missed, particularly in the wake of all of the warnings about President Trump. Since its inception in 1990 through the end of 2016 the VIX settled below 10 nine times. The index settled below 10 38 times in 2017. The last time VIX settled below 10 prior to 2017 was in 2007.

9. Worst Market Assumption: Balance Sheet Shock
There have been no shortage of market collapse predictions in 2017. Trump’s inauguration, the German election, North Korea’s nuclear threats and Venezuela’s economic crisis all were predicted by some to create a market correction. But it was the swirl of rumors that the late summer Federal Reserve meeting would lead to a monster selloff. The Fed announced plans to scale back its $4.5 trillion balance sheet, but — as we’ve noted in the past — the experience will be like watching paint dry.