Rarely in the last half century have the stars been so aligned for U.S. stocks.

The collapse in volatility and mid-year slump in bond yields has helped investors earn the third biggest risk-adjusted return from U.S. equities in 50 years, according to Bloomberg Sharpe ratio calculations. The measure tracks stock returns relative to Treasuries and volatility.

U.S. stocks have hit new highs this year as a bull market that started in March 2009 is poised to become the longest on record.

Treasury yields are ending the year little changed and stock volatility is close to historic lows.

Investor enthusiasm for technology shares and optimism over the potential benefits of U.S. tax reform have helped drive returns.

Companies are enjoying a ‘Goldilocks’ backdrop for profits with strong pricing power and surging cash flows, strategists at Jefferies Group LLC wrote in a recent note to clients.

However, the backdrop for equity markets has been unique, and may not recur in 2018, they said.

“The high Sharpe ratio is unlikely to be repeated given real rates are likely to move up in 2018,” wrote the strategists including Sean Darby.

“Equity returns should still be positive, but we see a lower Sharpe ratio in 2018,” they explained. 

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