1st Qtr Portfolio & Market Observations 2017

The first quarter of 2017 has been a great one, economically and financially. Despite all the worries and turmoil in D.C. and elsewhere in the world, the markets continued to rise and the economy continued to grow. As March 2017 marked the eighth anniversary of the second longest bull market in modern history, the Dow Jones Industrial Average broke through 21,000 only 24 days after breaking 20,000 for the first time in history, and by that time both the Dow Jones and the S&P 500 produced the longest stretch of trading days without a 1% decline on the record. All major domestic and international market indexes were up for the year, with NASDAQ Index gaining over 10%, while bonds and equity alternatives posted mixed results.

The growth of our domestic economy at the end of last year was reasonably healthy, and prospects for the first quarter of 2017 also look fairly solid. Though some analysts are projecting lower growth for the current quarter, this would be consistent with previous years, when lackluster growth for the first three months rebounded substantially later in the year.

In any event, we start the second quarter with both consumer and business confidence continuing to rise, job creation remaining strong and wages increasing. Faster growth of a number of European and Asian economies finally marks the beginning of the first synchronized global expansion since the crisis of 2008.

From a market viewpoint, the prospects look fairly good as well. It’s always important to remember that corporate fundamentals, and not Washington, D.C., ultimately dictate the direction of the stock market. Expectations for Washington’s success might be too high, but the reality is that corporate fundamentals remain quite healthy. That health is reflected in the fact that the markets have sustained such a remarkable rally despite all the real or perceived political risks. Even the failed attempt to repeal and replace the Affordable Care Act, the Fed’s tightening and the geopolitical turmoil in Asia and Far East could not dampen the market’s enthusiasm. Granted, the new quarter may not – and most likely will not – be as strong as the one just ended but those fundamentals, along with rising corporate earnings, could push markets higher. The modest downward pressure of the last few weeks should be seen as a healthy pause in an ongoing bull market.

Looking ahead, other than what we would consider “normal” corrections in the range of 5% to 10%, we remain cautiously optimistic. We believe that conditions exist for the current bull market to further extend itself albeit with not quite as much strength as we have previously experienced.

Dumont & Blake Investment Advisors, LLC
March 31, 2017

 

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