The U.S. stock market started the year just like it finished 2016 – on a tear! The market was up 5.9% for the first quarter of 2017 and up 17.8% over the past one year. Remarkable performance!
The market moved on a steady incline for almost the entire quarter, then leveled off towards the end of the quarter. Many indexes hovered around all-time highs as investors cheered President Trump’s actions to eliminate regulations and promises of tax cuts. Since the quarter end, volatility has increased slightly as the details and timing of any tax cuts has been unclear. However, details are due out at shortly and first quarter earnings have been very good so far. And it is profits that drive the market.
Some investors worry that stock prices are high. And that the bull market run since the financial crisis has created conditions that are ripe for a correction. Others argue that stock prices are relatively low given current interest rates. However, if significant tax cuts are passed relatively soon, the market will respond positively.
The Fed increased rates, as expected, for the third time in less than 18 months. The current rate is 0.75% – 1.00%. Many expect, and the Fed has signaled, two more increases this year. The market remained calm through the recent rate hike, as the Fed did what was expected by investors.
GDP growth and inflation are both running around 2%. The new administration is hoping to unleash economic growth through regulation reduction and tax cuts. The potential for these has fueled the market since President Trump was elected.
Foreign markets did extremely well during the first quarter with global indexes up 8.0% for the quarter and emerging markets indexes up 11.7%
The market should continue to do well in the short term as first quarter earnings continue to be released. Tax cuts will definitely propel the market upwards. But the summer is approaching and this has been a volatile time for the market over the last several years. And the process to pass tax cuts will not be an easy one. So investors should be cautioned that the current market run may hit some bumps over the summer.
The U.S. stock market finished 2016 on a tear. The market was up 3.99% for the fourth quarter and up 12.44% for the entire year.
Things got off to a slow start in the fourth quarter as concerns about rising interest rates and the Presidential election weighed on the market. Then, on the night of the election things got crazy. As it became unclear who was going to win the election, futures markets dropped significantly, with the Dow futures off by almost 1,000 points! But by morning the results had been determined and the market opened up positive and finished day positive. And the stock market has been on a tear since, with many major indexes hitting all-time highs. The stock market likes the idea of a pro-business President, with actual business experience, who will make starting and operating businesses much easier by reducing regulations and corporate taxes. The reduction in corporate taxes alone will deliver a 10% to 15% net increase in profits in the S&P 500, increasing earnings and as we often reiterate – corporate earnings drive the stock market.
Continue reading “Market Update 12.31.2016”
The U.S. stock market had a positive and uneventful quarter during the third quarter of 2016. The market was up 4.3% for the quarter and over 8% year to date. Foreign developed markets also fared well, bouncing back from Brexit and up 6.5% for the quarter.
A Federal Reserve rate hike has investors on edge. Will the Fed finally raise interest rates off historic lows, or not? As we discussed previously, Janet Yellin (Fed Chair) is a Keynesian economist. She believes that government intervention is crucial in maintaining a stable economy. She will not raise interest rates until she is absolutely convinced the economy can support even a small (0.25%) interest rate hike.
Continue reading “Market Update 9.30.2016”
The second quarter of 2016 was advancing in a steady, positive manner until the very end of the quarter when the U.K. voted to leave the EU. Brexit prompted a three day sell off, but the U.S. Market quickly recovered and ended the quarter up 2.6%. The U.S. Market is up 3.71% year to date.
Core inflation stayed above 2% and consumption remained steady. Retail sales were strong, up 1.3% in April, the largest monthly gain in two years. Oil prices rebounded, starting a recovery in the energy sector. New hires were way down in May but up in June, keeping the unemployment situation static.
Continue reading “Market Update 6.30.2016”
The U.S. stock market took a wild roller coaster ride during the first quarter of 2016. On the first trading day of the year the market dropped 1.5%. By the middle of January the market had experienced a “correction”. The fear was palatable. Several experts predicted imminent danger, with talk of a U.S. recession and a credit bubble bursting. But, the market calmed and actually experienced a remarkable recovery, ending up 1.08% for the quarter.
Continue reading “Market Update 3.31.2016”
I usually use this space to provide commentary on the U.S. stock market in the past quarter. However, given the market’s performance since the beginning of the year, I am starting my commentary with the current market conditions.
The U.S. stock market opened 2016 with a correction – almost a bear market. Continue reading “Market Update 12.31.2015”
The U.S. stock market plummeted during the third quarter of 2016. The U.S. market fell 7.02% during the past quarter. However, the market has recovered a great deal of the drop in October.
The sell-off in the U.S. market in August was triggered by the economic slowdown in China, the Federal Reserve’s inaction on interest rates combined with our economy’s anemic and sporadic growth.
China’s economy has been slowing for some time now. In August the government took action which led investors to believe that problems are worse than previously thought. When the world’s second largest economy slows down, it affects the world. Continue reading “Market Update 9.30.2015”
The U.S. stock market continued its lackluster performance in the second quarter of 2015. The U.S. market grew by a meager 0.08% for the quarter. Experts were hoping for a repeat of the last three years where the first quarter, which has historically been very positive, is flat but the second quarter has been very good. Not this past quarter.
While the U.S. market was flat for the quarter, it was not a calm quarter. The market exhibited significant volatility in the past quarter. Greece once again took the spotlight as they flirted with bankruptcy. But in the end Greece accepted the austere terms of the European Union and in return the EU bailed them out. Although no one’s 401(k) is directly invested in Greece, investors worry about the bigger picture. Greece isn’t the only country buried under enormous debt. Portugal, Spain and Italy still have significant problems with debt. In the past month Puerto Rico made headlines with their own debt problems. And lest we forget, the U.S. leads the pack with over $19 trillion in debt. No we are not Greece, but we have substantial debt that needs to be addressed immediately. And that means substantial cuts in the amount of money the government spends. When interest rates go up, the interest alone on our debt will be staggering. Continue reading “Market Update 6.30.2015”
The U.S. stock market, as a whole, had another terrific year in 2014, finishing with a strong performance in the fourth quarter. The U.S. market was up 5.14% in the fourth quarter and almost 13% for the year.
But these numbers do not tell the story. There was a tremendous amount of volatility in the fourth quarter, which is not normally the case. Historically the fourth quarter has been very positive. Many industries earn a substantial portion of their annual revenue in the fourth quarter. But this past quarter the market experienced a sharp sell-offs in October and December. The market, as a whole, recovered but not all sectors. Increased retail sales and industrial production helped the recoveries. Continue reading “Market Update 12.31.2014”
The U.S. stock market rose to new highs during the third quarter. But then volatility hit the market in September erasing most of the gains, leaving the market up only 0.21% for the quarter. The market was still up 7.33% year to date. However, further volatility in October has erased the gains for the year.
The volatility that investors have been expecting all summer long finally hit the market in September and even more so in October. Geopolitical issues the market seemed to ignore earlier in the year intensified as the Russian army continued to advance into Crimea. Tensions in the Middle East escalated as the terror army ISIS has grown to take over and dominate large chunks of Iraq and Syria. The U.S. and other countries responded with airstrikes in Iraq and Syria. The most recent crisis, the Ebola breakout, has world leaders struggling to contain the breakout which has spread, with three reported cases here in the U.S. and growing concerns about the government’s ability to control the outbreak. Continue reading “Market Update 9.30.2014”