Diversified Investors Off to Good Start in 2017
Sources: Equity Market and Fixed Income returns are from JP Morgan as of 1/13/16. REIT, Rates and Economic Calendar Data from Bloomberg as of 1/16/16.
U.S. large cap stocks fell slightly last week with the S&P 500 Index returning -0.1%. Smaller firms faired a little better as evidenced by the Russell Midcap Index gaining 0.1% and the Russell 2000 Index increasing by 0.4%. In terms of style performance thus far in the New Year, growth stocks have taken an early lead and are outperforming value companies. For example, the Russell 1000 Growth Index has gained 2.7% out of the gates in 2017 while the Russell 1000 Value Index has posted a 0.9% gain. On the international front, developed and emerging markets have both continued to enjoy a prosperous start to the New Year with the MSCI EAFE Index (i.e. international developed market stocks) up 0.8% and the MSCI EM Index (i.e. international emerging market stocks) up 1.7% last week.
Retail sales came in slightly below expectations on Friday showing a gain of 0.6% versus the consensus estimate of 0.7%. This reflects weaker holiday spending considering that after removing auto and gasoline from the retail sales figure, month-over-month growth was flat. Despite this tepid measure, consumer sentiment has remained strong with Friday’s reading coming in at 98.1. This latest release is only a tick below December’s which came in at 98.2- representing the highest level of consumer sentiment since the great recession. This should help keep a floor below the current retail sales figure and support future potential growth in consumer spending – the largest component of U.S. Gross Domestic Product (GDP).
President-elect Donald Trump is set to be sworn in on Friday, January 20th as the 45th President of the United States. Despite continued questions surrounding the details of the policies he has laid out, the market has continued to move higher during the beginning stages of 2017. Since December 31st stocks have rallied an additional 1.7% while gold prices, typically a barometer of either uncertainty or inflationary pressures, has also rallied and has gained over 4%. Investors that have embraced the value of diversification in their portfolios have benefited thus far in 2017, which was not necessarily the case in 2016. Consider that U.S. stocks, international stocks, fixed income, and certain commodities such as gold, silver, copper and corn all have experienced positive returns in 2017. Asset classes and sectors trading slightly lower include energy related commodities such as oil and natural gas as well as the U.S. Dollar. This type of atmosphere should serve as a reminder that diversified investors can fare well during periods of uncertainty and heightened volatility.
If you would like to have your portfolio reviewed to better understand your exposure to different asset classes, or to simply have a conversation about our current thoughts on the market and economy, please do not hesitate to speak with your Hennion & Walsh Financial Advisor or a member of the Hennion & Walsh Asset Management Team.
Important Information and Disclaimers
Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion & Walsh cannot guarantee the accuracy of said information and cannot be held liable. This information is provided for informational purposes only and is not a solicitation to buy or sell any of the asset classes or sectors discussed.
Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.
There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions. Distributions from REIT investments are taxed at the owner’s tax bracket.
The prices of small company and mid cap stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions.
Investing in commodities is not suitable for all investors. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity.
Products that invest in commodities may employ more complex strategies which may expose investors to additional risks.
Investing in fixed income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high yield bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than original cost upon redemption or maturity. Bond Prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the value of your investment.
MSCI- EAFE: The Morgan Stanley Capital International Europe, Australasia and Far East Index, a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada.
MSCI-Emerging Markets: The Morgan Stanley Capital International Emerging Market Index, is a free float-adjusted market capitalization index that is designed to measure the performance of global emerging markets of about 25 emerging economies.
Russell 3000: The Russell 3000 measures the performance of the 3000 largest US companies based on total market capitalization and represents about 98% of the investible US Equity market.
ML BOFA US Corp Mstr [Merill Lynch US Corporate Master]: The Merrill Lynch Corporate Master Market Index is a statistical composite tracking the performance of the entire US corporate bond market over time.
ML Muni Master [Merill Lynch US Corporate Master]: The Merrill Lynch Municipal Bond Master Index is a broad measure of the municipal fixed income market.
Investors cannot directly purchase any index.
LIBOR, London Interbank Offered Rate, is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.
The Dow Jones Industrial Average is an unweighted index of 30 “blue-chip” industrial U.S. stocks.
The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
DJ Equity REIT Index represents all publicly traded real estate investment trusts in the Dow Jones U.S. stock universe classified as Equity REITs according to the S&P Dow Jones Indices REIT Industry Classification Hierarchy. These companies are REITSs that primarily own and operate income-producing real estate.