International Stocks Surge05-02-2017 |
Sources: Equity Market and Fixed Income returns are from JP Morgan as of 4/27/17. REIT, Rates and Economic Calendar Data from Bloomberg as of 5/01/17.
U.S. Stocks had one of their best weeks of 2017 with the S&P 500 Index and the Russell 2000 Index each advancing 1.5%. The Russell Midcap Index lagged but still posted positive results with a 0.9% gain. As has been the theme thus far in 2017, Growth stocks continue to outpace Value companies. This is at least partially due to the strong performance of Technology stocks, which have outpaced all other sectors this year with a 15.4% year-to-date gain. Internationally, developed markets had their best week of 2017 as the MSCI EAFE Index gained 3.1%. Investors cheered the prior weekend’s first round French election results which were in-line with polling data. While the final round of voting still needs to take place this upcoming weekend, there is a bit more clarity on the likely outcome and European stocks have rallied as a result. International emerging markets gained 1.7% last week and continue to be the best performing geographic region of 2017, advancing approximately 14% since the start of the year.
About half of the components of the S&P 500 reported first quarter (Q1) earnings as of the end of last week and results have come in above forecasts. Over two-thirds of the companies that have reported have beaten estimates and the blended growth rate for Q1 earnings is now 12.5%. According to Factset, this would represent the highest year-over-year earnings growth in over 5 years.
We, at Hennion & Walsh, have long considered an allocation to international stocks as a worthy consideration for long term, growth oriented investors. With global economic growth appearing to pick up and corporate earnings following suit, investors with an allocation to international stocks have been rewarded this year. Given relatively more attractive valuations, potentially less political risk, and strong corporate fundamentals, certain international stocks should continue to press higher in 2017. On the earnings front, we are encouraged to see that year-over-year growth for the Stoxx 600 Index (essentially Europe’s version of the S&P 500 Index) has been far better than expectations. In fact, European stocks are actually posting year-over-year earnings growth of 13%, surpassing the U.S.’s earnings growth rate for the first time in five years.
If you would like to have your portfolio reviewed to better understand your exposure to different asset classes, geographies and sectors, 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.