Look out for some “Trump Bumps” in the Road Ahead
Sources: Equity Market and Fixed Income returns are from JP Morgan as of 1/27/17. REIT, Rates and Economic Calendar Data from Bloomberg as of 1/30/17.
Stocks finished higher last week both in the U.S. and internationally led by some additional fuel from the “Trump Trade” rally and positive reports on the U.S. economy. For the week, the S&P 500 and Dow Jones Industrial Average Indexes rose by 1.04% and 1.34% respectively. International developed markets, as measured by the MSCI EAFE Index rose by an equally impressive 1.30% gain for the week while the MSCI Emerging Market Index continued to lead the way with a weekly increase of 2.55%. Emerging Market stocks, as represented by the MSCI Emerging Market Index, have skyrocketed higher by 6.25% thus far in 2017. As a result, we would not be surprised to see mutual fund and exchange-traded fund (ETF) flows shifting from the “Trump Trade” sectors that have dominated market attention over the past couple of months to the International Emerging Markets asset class in the near future. However, we would warn investors to not try and chase recent performance and always view any new investment in light of the other investments in their portfolio as well as their own tolerance for risk and investment objective.
The start of the new week brought a return of stock market volatility, likely associated with a “Trump Bump” in the road stemming from some of the uncertainty and uneasiness in what his policy directives may entail. Other concerns are also brewing related to 4th Quarter 2016 earnings and gross domestic product (GDP) results. With so many uncertainties and potential “Trump Bump” potholes ahead in 2017, investors would be wise to consider bracing their portfolios for likely periods of short-term volatility.
Despite this, we, at Hennion & Walsh, would still contend that the U.S. economy is relatively strong, and that the majority of policies outlined by President Trump should help support additional U.S. growth in the near term. To reiterate, less regulation, lower corporate taxes, and increased infrastructure spending should not only benefit the U.S. economy and stock market as a whole but also could provide for investment opportunities in certain sectors and asset classes ahead.
To learn more about how we at Hennion & Walsh are helping clients navigate through this seemingly complicated investment environment, please do not hesitate to reach out to your Hennion & Walsh Financial Advisor.
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.