The third quarter of 2017 is in the books and there are only 10 more Fridays until Christmas! This year seems to have flown by. We wanted to take a moment and give you some of our observations on the market.
Equity Markets. The equity markets had a strong quarter with the Dow up another 5% and the S&P 500 gaining 4%. Mid-cap’s gained a mere 3% with small-caps rallying hard into the end of the quarter to close up nearly 6% on the quarter. On the year, mid-caps and small-caps are up around 8%, large-caps are up 13%. [i]
Earnings. The second quarter earnings that were announced in the third quarter were up strongly. S&P 500 companies delivered 10.3% earnings growth in the second quarter. This was after a strong double digit growth in the first quarter. This is the first time that the index has reported double digit growth in back-to-back quarters since 2011. Approximately 70% of companies beat their sales estimates, also the highest number since 2011. Companies remain optimistic with their forward guidance as earnings growth in the high single digits is expected over the next few quarters.[ii]
Other Economic Data. On the jobs front, more than 1.4 million jobs have been added in 2017 through the end of August. The unemployment rate held steady at 4.4%. Inflation fell back below the Fed’s 2% target in recent months. While the Fed has indicated that they would like to raise rates four times between now and the end of 2018; if inflation stays below the 2% target they could slow that rate of increase.[iii]
Fixed Income. Most fixed-income categories posted low single-digit positive returns this quarter. Despite a fourth policy rate hike from the Fed during the 2nd quarter, bond yields moved even lower across categories the past 3 months. Yields remain extremely low relative to history.[iv] Our bond portfolio performed well in the third quarter despite being low duration and high quality.
All of the portfolios performed in line with expectations and we do not foresee any significant changes. All of our indicators are positive but should that change we will respond and let you know of any changes we are making.
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New Tax Law Summary
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