Commentaries

INVESTMENT PERSPECTIVE JULY 2017

The U.S. stock markets are up 9% year -to-date , marching to the tune of solid fundamentals despite the noise in Washington. When the year began, there was confidence in a pro -growth agenda of lower taxes, less regulation and infrastructure spending. A t the same time , there were worries about trade bar riers, tighter immigration policies and Trump’s mercurial behavior. F rankly, not much has happened in Washington on either front and inve stor s seem accepting of gridlock. Not only are stock prices rising , but they are mov ing stead ily higher without much volatility. In fact , this has been one of the least volatile periods in the last 50 years as defined by the number of days w hen the S&P 500 is up or down by 1% or more. In addition, the VIX volatility measure – the “fear gauge” – recently hit its lowest c lose in 24 years and the third lowest in its 30 year history. So why is the stock market calmly advancing to new highs? A few key reasons: economic growth is stable and balanced, employment growth is strong, capex is increasing, interest rates are low, inflation is subdued and corporate earnings are expected to grow approximately 10% annually over the next two years. In addition, risk premiums are shrinking, price earnings multiples are rising and confidence is improving. We expect the favorable environment to be sustained and look forward to more investment success ahead. A summary of index returns for the year-to-date ending June 30 is as follows:

Dow Jones Industrials +9.4%
Russell 2500 +6.0%
MSCI EAFE +13.8%
S&P 500 +9.3%
NASDAQ Composite +14.7%
Wilshire 5000 +8.9%

INVESTMENT PERSPECTIVE JULY 2017 (pdf)