Feb 6, 2017

Financial Market Summary and Outlook

FDP Header Financial Market

January 2017

Good vs. Average

2016 was a very good year for diversifed portfolios as returns were boosted by exposure to diversifer asset classes, meant to provide additional risk adjusted return over time. This is a welcome turnaround from 2015, when most diversifer asset classes trailed large cap US stocks as represented by the S&P 500 Index. If you use the S&P 500 Index as your yardstick, then 2016 turned out to be an average year for stocks. Going back to 1928, the average annual return, including reinvested dividends, runs nearly 10% (NY Stern School of Business data). When the year had ended, the S&P 500 rose 9.54%. Throw in dividends and 2016 rose 11.96% (Morningstar). Mid-cap and smaller company shares topped 20%.. SEE MORE…..

Index Graphic

A Look Back at 2016

The year finished on a solid note, but 2016 didn’t start out that
way. Falling oil prices, worries about China, an upward lurch in
junk bond yields, and overblown fears of a recession took a big
toll on investor sentiment. CNNMoney pointed out that the first
ten days of the year were the worst start for the Dow in its history
– that’s going all the way back to 1897. To compound the angst,
comparisons to 2008 were rife. However, this wasn’t 2008, there
wasn’t a subprime crisis that was brewing, and shares touched
bottom in early February (St. Louis Federal Reserve). SEE MORE….
































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How Do Investors Spell Relief?

Investors celebrated an ‘in line with expectations’ CPI that suggested the rate of inflation isn’t accelerating. It’s a small win, but it was enough to send the three major market indexes, the Dow, the Nasdaq, and the S&P 500 to new highs.

An Annual Ritual at the Gas Pump

You’re right if you have this nagging feeling that gas prices rise in the spring. As the graphic illustrates, on average prices rise through Memorial Day, plateau over the summer, and slip in the fall. This year is no exception, as prices echo the seasonal pattern.

Rate Cuts Still on the Table, Timing Less Certain

We often discuss the Federal Reserve and interest rates because both greatly impact investors. For starters, changes in interest rates have a significant impact on stock prices and income earned on savings. Sharply higher rates in 2022 pushed equities into a bear market.

Just Do It

That ubiquitous phrase from one of America’s most extensive athletic footwear and apparel makers seems to have been adopted by most American shoppers. The U.S. Census Bureau reported last week that retail sales jumped 0.7% in March, following a strong 0.9% rise in February.

The Road to Lower Inflation Takes a Detour

The rate of inflation is accelerating. That’s not how we hoped to start this week’s Insights. Take a moment and review Figure 1. The 4-month moving average has broken out of its long-term downward trend (red-dashed lines). On a monthly basis, prices bottomed in June and began to gradually turn higher. The upward trajectory picked up in January.