For investors, 2017 was a mirror image of 2016. The top performing types of American companies in 2016 were the biggest laggards in 2017. Meanwhile, the worst performing types of U.S. stocks in 2016 were the biggest winners in 2017.

The orderly rotation of the leaders and laggards vividly illustrates how Modern Portfolio Theory worked in the real world last year. Modern Portfolio Theory is a large body of knowledge based on 70 years of research by investment academics. It's a framework for how investing is now taught in the world's best business schools and long embraced by institutional investors. Basically, classifying investments based on their statistical characteristics imposes a discipline for managing assets based on history and fundamental facts about the economy.

Of course, human judgment based on a good sense of history is critical in applying the theory to people in the real world. And all this doesn't guarantee success. It's a theory. But it is the best solution spawned of the research by several generations of the world's best minds for increasing the likelihood of investment success, and it is the framework for investing that this firm believes in.