Volatility Returns: The Markets’ Response to Change – Weekly Update for May 22, 2017

Early last week, both the S&P and NASDAQ recorded all time highs before tumbling along with the Dow as political concerns rose. By Friday, though, the markets had largely rebounded and steadied. The S&P 500 closed the week down 0.38%, the Dow saw a 0.44% loss, and the NASDAQ reported a 0.61% decline. The MSCI EAFE reported up 0.79% for the week.

The CBOE VIX is designed to measure market volatility by using S&P 500 put and call index option prices. For most of the year, volatility in the markets has been low. However, the CBOE Volatility Index (VIX) spiked 40% midweek before falling back by week’s end, indicating a possible increase in market volatility.

Through the week’s ups and downs, investors followed some other important economic developments.

LAST WEEK’S DEVELOPMENTS:

  • Solid Regional Business Index
    The Philadelphia Fed Business Outlook Survey again pointed to progress in the factory sector. While the consensus range was 16.0 – 25.0, the General Business Conditions Index-Level reported 38.8.
  • Mixed Housing Reports
    New home sales remained strong as the housing market index rose 2 points to 70. The data came out well ahead of the 65 – 69 consensus range. However, April housing starts were lower than expected. Housing starts are now at a 1.172 million annualized rate, after falling 2.6%.
  • Household Debt Rises
    Total household debt rose to a new high, reporting a $149 billion increase to come in at $12.73 trillion. Student loans and auto loans were major contributors to the rising debt:

WHAT’S AHEAD

Economy
Manufacturing output rose 1.0 percent in April, the strongest monthly result in over 3 years. As such, investors will track how the rest of the second quarter shakes out. In addition, we will be interested in this week’s housing reports, hoping for a better handle on where this up-and-down sector is heading.

Geopolitical
Financial markets could experience some headwinds as geopolitical situations fester. Concerns over North Korea and political opposition to globalization remain. In addition, Brazil is facing political disruption and a deep recession that could mean problems for companies with business interests in that country. Similarly, continuing political challenges for the Trump administration may adversely affect proposed tax reform, health-care legislation, and infrastructure initiatives.

As always, we will continue keeping abreast of market and economic updates. We encourage you to focus on your long-term financial outlook. Should you have any questions, we are happy to help.

ECONOMIC CALENDAR

Tuesday:  New Home Sales
Wednesday:  Existing Home Sales
Friday: Durable Goods Orders, Consumer Sentiment

Invest Lifestyle Expenses on Memorable Experiences

Financial envy is even more of a thing now than it was back in 1913 when cartoonist Arthur R. “Pop” Momand debuted the comic strip “Keeping Up with the Joneses,” which centered on the misadventures of Aloysius P. McGinnis and his family, who were always trying to keep up with their never-seen neighbors, the Joneses.

Today, we not only have television shows displaying lifestyles of the rich and famous, we’re punched with images and status updates in social media, too.

We not only see the “Joneses” on television, but we are likely connected on social media to colleagues and friends who post frequent photos and statuses about their new luxury car, boat, or 3-carat diamond ring.

Though we may think the grass is greener at the Joneses, we have no way of knowing whether that snapshot is a true picture of “the good life,” or a depiction of living beyond one’s means.

One 2016 study of household debt in America shows the average household has debt balances totaling almost $17,000, and the average household with any kind of debt, including mortgages, owes nearly $135,000.

Most people pursue happiness and there are economists who assert that happiness is the best indicator of a society’s health. In that pursuit, some folks assume if we spend money on an object, we will be happier longer because that item lasts longer than say, a one-off experience like a vacation or a concert. According to recent research, though, that assumption might be incorrect.

That same study showed buying things makes us happy, but only briefly. Its continual presence makes it fade into our surroundings. The study also showed that among those surveyed, people’s satisfaction with buying things decreased, while those who spent money on experiences showed increased satisfaction over time. That is because experiences tend to become imbedded in our identity.

There are at least two tactics we can employ to enhance and prolong our enjoyment of spending our lifestyle expenses: spending on experiences, not things, and savoring those experiences.

The good news is that there are techniques you can develop to savor your experiences and amplify the happiness you derive from them. Researchers have identified 4 common strategies for relishing. You can use one or combine tactics:

1. Build your anticipation of your experience or trip. Talk to family, friends and/or coworkers about what you will be doing or where you are going. If you are traveling with a group, get together with them and learn more about the destination or adventure and plan your activities. During your gathering, immerse yourself in the culture by eating foods and listening to music from the area where you are planning to travel.

2. Stay present and fully appreciate what’s happening. Do not observe everything around you from behind a camera lens, phone camera or otherwise. First, take in and really absorb everything around you. Savor the experience, the landscape, the city skyline—whatever it is you are in or doing. Afterward, take time memorializing everything; purchase a quality keepsake from your experience, take pictures, write in a journal, post your adventures on your social media accounts. Choose a unique hashtag for your trip/adventure and share it with your family and friends. When you are back home, look up your hashtag and follow the chronology of your trip and see all the things people said about your posts.

3. When you get home, reminisce, relish, relive. Get together with your travel mates and share stories, photos, and souvenirs. Place your keepsake where you can see it and recall memories of your trip/adventure. You also might consider putting up a photo or postcard in your home or office, or changing the image on the home screen on your phone to one from your adventure. Read a fiction or nonfiction book set in or written about the place you visited.

4. Talk about and share with others at every stage of your trip/adventure. By sharing at every stage (anticipation, experience, reminiscence), you prolong and enhance all the things you enjoyed about your trip/experience. While you are on your trip, talk with your travel mates at each meal about favorite moments. Share your experience by talking to others, writing or blogging about it, or posting visual and written snapshots on your social media accounts. Last Fall, I had the incredible opportunity to travel to Honduras with a team from my church. We got to see how a church, a medical clinic, a child development program, and new homes are transforming lives in the city of La Ceiba. It was life-changing. I wanted to share the incredible experience with everyone so that they could get a glimpse into what we experienced, and wrote a post with pictures about the trip, and you can view the post here as an example.

These ideas help prolong your experience and make it bigger than life, which ultimately makes you feel as though you have gotten the most out of your investment, whether you spent $300, $3,000 or $30,000 on your experience.

Thank you for reading! If you have any questions or would like to discuss any financial topics, we are happy to talk.

 

Markets Ignore The Politics – Weekly Update for May 15, 2017

Markets tuned out noise from Washington last week and continued to focus on economic fundamentals. Mildly rebounding retail sales and strong consumer sentiment seem to point toward a modestly stronger second quarter.

After a three-week winning streak, both the Dow and S&P 500 reported slight losses. The Dow closed with a 0.53% loss, and the S&P 500 reported a 0.35% decline for the week. The NASDAQ, however, rose 0.34% while the MSCI EAFE reported a modest 0.16% gain.

MIXED SIGNALS CONTINUE

  • Soft retail earnings

Consumer retail purchases were up after a first-quarter decline. Sales rose by 0.4% (just shy of the 0.6% consensus), and 9 of the 13 retail categories posted gains.  As expected, early second-quarter gains suggest the first-quarter decline was just a blip.

  • Continuing concerns over store closings

A report last month concluded that in excess of 8,600 brick-and-mortar stores could close in 2017 due to poor sales. Last year, at least 2,000 stores shut their doors, while just over 5,000 closed in 2015. The record for store closings occurred in 2008 when over 6,000 stores closed.

  • Strong consumer sentiment

Despite modest retail sales, consumer confidence reached a 4-month high. Consumer expectations are positive regarding job growth, income, and low inflation. Furthermore, 44% of surveyed consumers expressed optimism in their financial prospects—the highest percentage since 2004.

  • S. consumer prices rise in line with expectations

The consumer price index rose 0.2% in April, in line with expectations for the month. However, the medical care and communications sectors saw continuing price weakness.

LOOKING AHEAD

This week, we will look forward to data regarding the strength of the housing market. Though the highest percent of consumers in over 10 years report positive opinions on selling homes, next week’s numbers will give us a better idea of where the markets stand. Finally, the market will continue to watch oil prices, which steadied this week after three weeks of decline.

In the weeks ahead, possible corporate tax rate reductions and potential trade policy changes will remain in focus for markets. In addition, markets will remain interested in the Fed’s interest rate plans and its plan to reduce its $4.5 trillion balance sheet.

As always, we will continue to track the impact of international and domestic political news on the markets and the economy.

ECONOMIC CALENDAR

Monday: Housing Market Index
Tuesday: Housing Starts, Industrial Production
Wednesday: EIA Petroleum Status Report
Friday: Philadelphia Fed Business Outlook Survey

Mixed Signals, Positive Performance – Weekly Update for May 8, 2017

Last week, stocks rose but floated within a narrow trading range. By Friday, however, both the S&P 500 and the NASDAQ reached record highs. For the week, the S&P 500 gained 0.63%, the Dow finished up 0.32%, and the NASDAQ rose 0.88%. The MSCI EAFE added 1.7%.

Overall, we experienced another week of generally positive, but somewhat mixed, economic signals. Soft auto sales and tumbling oil prices offset increased job creation and the lowest unemployment recorded in a decade.

POSITIVE MARKET NEWS

  • Increased Job Creation and Low Unemployment
    In April, U.S. payrolls added 211,000 jobs, exceeding the 190,000 predicted and showing a significant bounce back from March’s 79,000 increase. The jobless rate also dropped to 4.4%—the lowest it has been since May 2007. The economy added jobs in several industries:

    • Leisure and hospitality: +55,000 jobs
    • Health care: +20,000 jobs
    • Mining: +9,000 jobs
    • Professional and business services: +39,000 jobs
    • Government: +17,000 jobs
  • Strong Corporate Earnings
    First quarter earnings season continued last week, and U.S. companies once again reported strong results. So far, companies with majority overseas profits are reporting an average revenue growth of 19.9%, outperforming S&P 500 companies with domestic earnings only. This difference helps explain how corporations are reporting strong Q1 earnings despite sluggish economic growth in the U.S. during the same period.

MIXED SIGNALS

  • Auto Sales Below Expectations
    U.S. motor vehicle sales bounced up to an annualized rate of 16.9 million. Though April’s report falls below the predicted 17.2 million, it improves on March’s 16.6 million annualized rate.
  • Oil Prices Tumble
    Oil prices tumbled last week. Both June West Texas Intermediate (WTI) crude and July Brent crude finished the week down. WTI closed at $46.22 a barrel, falling approximately 6.3% below last week’s close. Brent crude fell by about 5.6% for the week to $49.10 a barrel.

LOOKING AHEAD

On Wednesday, May 3, the Federal Open Market Committee (FOMC) announced it would keep the federal funds target range at 0.75% to 1.00%. Nonetheless, the Fed remains encouraged that the second-quarter GDP will rebound, because they believe consumer fundamentals remain solid. This sentiment may indicate the FOMC will raise rates in their June meeting.
On Sunday, Emmanuel Macron won the French presidential election, as expected. Macron’s win should ease European Market concerns, as he is a centrist who supports global trade, the euro, and France’s continuing membership in the EU.

As we look ahead to this week, our analysis will include a variety of international and domestic focuses. In particular, consumer prices, retail sales, and business inventories will highlight economic reports for the week while oil prices also should remain in focus for investors.

ECONOMIC CALENDAR

Tuesday: JOLTS (tracks monthly changes in job openings)
Thursday: Jobless Report, Producer Price Index
Friday: Consumer Price Index, Retail Sales, Business Inventories, Consumer Sentiment

Earnings, Taxes & International News: What’s the Market Impact? – Weekly Update for May 1, 2017

Stocks continued their advance on generally strong earnings reports this week despite the GDP report showing a slow first quarter economy. The S&P 500 rose 1.51%, the Dow gained 1.91%, and the NASDAQ added 2.32%. On Tuesday, the NASDAQ posted record highs as it closed over 6,000 for the first time. Internationally, the MSCI EAFE was up 2.97%.

On Friday, April 28, we learned that first quarter GDP increased a modest 0.7%, lower than the reported consensus expectations of approximately 1%. Oil drilling and housing performed well, but consumer spending fell, largely due to poor auto sales and lower utility bills. Consumer spending, the largest segment of our economy, rose by only 0.3%.

While this growth is slower than the 2.1% last quarter—and the lowest we’ve experienced in three years—the picture is likely not as negative as it may seem at first. Not only did mild weather affect consumer spending on heating, but the government has also acknowledged its challenges accurately calculating data for first quarter GDP.

In addition to these GDP readings, a number of other events and data releases contributed to market performance this week.

Domestic Developments

  • Corporate Earnings Were Largely Positive
    Thus far in the first quarter, 79% of reporting companies published strong profits. In particular, consumer discretionary companies and commodity producers reported robust earnings while phone services and real estate investment trusts had weaker results.

  • Trump Announced Tax Plan
    President Trump outlined his new tax proposal, including plans to cut corporate taxes to 15%. Individual tax rates would fall to 10%, 25%, and 35% if Congress adopts the President’s plan.

International News

  • North American Trade Experienced Tension
    On Wednesday, April 26, reports that the U.S. may pull out of NAFTA created concern in financial markets. By Thursday, however, markets calmed after President Trump said he would agree to requests from Canada and Mexico’s leaders to renegotiate the decades-long trade deal. As these negotiations continue, two controversies lay in the background:

    • U.S. dairy farmers’ claims that Canadian action concerning milk imports violates the trade agreement.
    • A new tariff of up to 24% on Canadian softwood lumber that President Trump announced last week.

Finding the right solution for the negotiations is important to the U.S., Canada, and Mexico. NAFTA affects a significant portion of each country’s economy, including industries such as farming, automotive, and energy. Trade with the two countries accounted for approximately $584 billion in U.S. exports in 2016.

What’s Next

With Congress avoiding a shutdown last week, the markets should focus this week on:

  • Earnings reports
  • Construction spending
  • April auto sales
  • Manufacturing data
  • Federal Reserve meeting on Wednesday

By Friday, most remaining S&P 500 companies’ earnings reports will be in, including Apple, Facebook, and Pfizer. Looking ahead, we will watch for what economic stories emerge from the data we receive, including the upcoming jobs report. For now, despite the first quarter’s initially slow GDP growth of 0.7%, expectations continue for 2.5% growth in 2017.

ECONOMIC CALENDAR:

Monday: Construction Spending, Personal Income and Outlays, PMI Manufacturing Index, ISM Manufacturing Index
Wednesday: ADP Employment Report, PMI Service Index, ISM Non-Manufacturing Index
Thursday: International Trade, Productivity and Costs
Friday: Employment Situation

 

Did you know that April is National Financial Literacy Month?

What started out as a financial-literacy awareness day more than a decade ago is now a month-long campaign that has been recognized by Congress every year since 2004. The program is designed to highlight the importance of financial literacy and teach people of all ages how to manage their money wisely. And, according to recent surveys, Americans have a lot of room to improve in their financial knowledge.

A July 2016 study by the Financial Industry Regulatory Authority (FINRA) shows that 63% of Americans are unable to correctly answer more than three of five questions about basic economics and finance. FINRA’s study included more than 25,000 American adults, who represented national population in terms of age, gender, ethnicity and education.

About 40% of those surveyed spend less than they earn. The other 60% are either breaking even or spending more than they earn, which means they are unable to save money steadily.

It’s no surprise then that the study also shows that 50% of Americans don’t have a “rainy day” fund to cover expenses for three months — in case of emergencies such as sickness, job loss or economic downturn. Those without an emergency savings face unexpected financial blows that not only compromise their personal financial stability, but decrease overall economic stability as well.

Let’s look at three tips that could enhance your financial literacy, or that of one of your friends or family members.

Set and Follow a Budget that Works for You

There are norms in budgeting, but those are variable and defined by influences out of your control, including your zip code and tax bracket. Ask yourself what your normal is. An estimation tool you might use is the 50/30/20 rule. That ratio breaks down like this:

  • 50% of net income: Spend about 50% of your take-home pay on “fixed costs” — bills that are about the same amount each month. This might include things such as rent/mortgage, car payments, utilities, cell phone service, and memberships or subscriptions (Netflix, gym, Spotify).
  • 30% of net income: In the 50/30/20 plan, about 30% of your net pay would go toward flexible spending — also commonly called disposable income or lifestyle expenses. These might include costs for hobbies, shopping, and entertainment. We will include gas and groceries in this category because even though they are needs, how you spend your money on these things might vary. One month, you might travel, which means you might spend more that month on gas and food/groceries.
  • 20% of net income: Reserve about 20% of your net income for your financial goals. Three important goals to think about are paying down credit-card debt, saving for retirement, and building that emergency fund.

Manage your habits; change them if needed so they work for you. And remember that financial stability doesn’t necessarily mean mortgages and car payments. Determine your normal.

Start Saving Now

Saving money is easy to put off doing, since the consequences of not steadily saving may not be noticed or felt until later in life when you try to buy a house, send your kids to a top college or retire at a certain age.

So, start now — one of the easiest ways to make regular savings deposits is to pay yourself first from each paycheck. That way, it’s gone before you even notice it’s missing. Though saving for retirement usually is priority, you might also want to make sure you have financial reserves for emergencies.

Set Specific Financial Goals

It’s never too soon, or too late, to set financial goals. According to an ongoing survey conducted by the National Financial Educators Council on its website, participants between the ages of 18 and 24 made barely passing scores of between 68% and 73% on the 30-question test, designed to measure a person’s ability to earn, save and grow their money. The results were only marginally better — at 73% — for those in the 25- to 50-year-old age group.

The first steps to setting financials goals include:

  • securing a steady source of income;
  • making sure you have financial reserves;
  • protecting yourself and your family from financial upheavals or disaster by buying the right insurance for life, health, disability income, and possessions.

Getting further ahead each year takes patience and planning. If your reserves stay flat, inflation will diminish its value. Stay alert and ready to go after opportunities to grow your money.

Think about what your personal financial goals are — sorting them by wants or needs might help. Decide which ones are long-term or short-term goals and prioritize them. Choose goals you’re enthusiastic about to help you reach them.

With your 50/30/20 budget, you should be able to distribute your limited resources in ways that make it possible to reach your goals.

If you have questions or would like to learn more about certain financial topics, we are happy to talk. Send us an email, or give us a call at 419-425-2400.

 

 

Stocks Up on French Election Uncertainty – Weekly Update for April 24, 2017

Domestic stocks posted losses on Friday, April 21, largely due to investor concerns about the French election. Despite these daily losses, U.S. indexes broke their two-week losing streak, with the S&P 500 adding 0.85%, the Dow gaining 0.46%, and the NASDAQ increasing 1.82%. International stocks in the MSCI EAFE grew by 0.18%.

What Did We Learn Last Week? 

  • The French Election Is Concerning Investors

Uncertainty surrounding France’s presidential election contributed to investor caution last week. After Sunday’s ballot, National Front candidate Marine Le Pen will advance to the second round of voting on May 7, which decides the new president. Le Pen has promised to remove France from the European Union if she wins, a choice that could affect markets and currencies.

  • Quarterly Earnings Reports Are Mostly Strong

By Friday morning, 95 companies in the S&P 500 had reported their quarterly earnings; 77% of them beat earnings-per-share estimates.

  • Existing Home Sales Jumped 4.4% in March

Sales of existing homes hit levels not seen since 2007, and median home prices are up 6.8% over a year ago. Supply levels remain tight, and demand is high, as 48% of homes sold last month were on the market for less than a month.

  • Housing Starts Declined 6.8% in March

While the headline number for housing starts may seem pretty disappointing, it largely reflects the results of a return to typical March weather after unseasonably mild weather boosted starts in January and February. Overall, housing starts are up 9.2% over this time last year.

  • The Consumer Price Index Missed Expectations

Declines in gas and other energy prices contributed to the U.S. Consumer Price Index (CPI) falling 0.3% in March—its first monthly decline in more than a year.

  • Tax-Plan Information May Be on the Horizon

On April 20, Treasury Secretary Steve Mnuchin indicated that tax reform remains important. The next day, President Trump said a tax plan should be coming this week.

  • Oil Prices Dropped

Crude oil prices fell below $50 a barrel after losing 2.15% on Friday. Investors are showing concern about whether output decreases by OPEC can balance out against increasing U.S. production and prevent oversupply.

What’s Ahead

Moving into the last week of April, we will learn both first quarter GDP readings and gain further insight into consumer confidence and housing performance. On Friday, April 28, initial readings for first quarter GDP will help deepen our understanding of where the economy stands right now. Consensus estimates are at a soft 1.1% growth, even lower than last quarter’s 2.1% increase. After seeing this week’s low CPI numbers, combined with retail and inventory data, Barclays decreased its GDP estimate to only 0.8%.

Last week provided a variety of data and perspectives that are continuing to reveal themselves. As momentum from the French presidential outcomes and our own economic growth unfolds, we will watch these developments closely. Meanwhile, we encourage you to continue a long-term focus on your goals, and we are here to discuss any questions you may have along the way.

ECONOMIC CALENDAR

Tuesday: S&P CoreLogic Case-Shiller HPI, New Home Sales, Consumer Confidence
Wednesday: EIA Petroleum Status Report
Thursday: Durable Goods Orders, International Trade in Goods, Pending Home Sales Index
Friday: GDP, Employment Cost Index, Consumer Sentiment

First Glance: What Does Our Economy Look Like This Year? – Weekly Update for April 17, 2017

Last week, major indexes experienced losses for the second week in a row, with the S&P 500 falling 1.21%, the Dow giving back 1.01%, the NASDAQ dropping 1.26%, and the MSCI EAFE declining 0.14%.

Markets closed on April 14 for the Good Friday holiday, but in the four trading days, a number of headlines dominated the news cycles:

  • International tensions surrounding Syria and North Korea continued to heighten.
  • The U.S. dropped its biggest non-nuclear bomb in Afghanistan.
  • United Airlines lost $250 million in market value on Tuesday after footage emerged of a passenger’s violent removal from an overbooked flight.

These headlines drew great attention last week, and we will continue to follow events as they develop. Meanwhile, we want to focus on newly released data from last week that gives perspectives on where the economy is today—and what we should watch for in the coming months. In a nutshell, the reports hinted at relatively slow growth in the first quarter of 2017.

Inflation and Spending Dropped

  • The producer price index, which measures price changes for producers of goods and services, missed expectations and fell 0.1% in March.
  • The consumer price index, which measures price changes in a group of goods and services consumers purchase, fell 0.3%—much more than predicted.
  • Retail sales declined 0.2% in March, the second monthly drop in a row.

Consumer Sentiment and Jobless Claims Were Positive

  • The April Consumer Sentiment Index readings beat expectations, revealing people’s assessment of current economic conditions being near the all-time high.
  • Jobless claims came in well below expectations to show fewer people filing first-time unemployment claims—indicating a strong labor market.

Analyzed together, this new data could indicate that the Federal Reserve will be less likely to raise rates in June. However, we still have two more months of data and market performance until that meeting, and much can change in that time. Consumer spending accounts for approximately 70% of the total economy. Thus, high consumer sentiment and a tightening labor market—coupled with delayed income-tax returns—could help the economy pick up in the coming months.

Right now, we are in the thick of quarterly earnings season. Last Thursday, we saw J.P. Morgan Chase and Citigroup exceed their earnings estimates and still lose value in their shares that day. Determining whether this investor response is industry specific or indicative of other sentiment changes will be a key detail to examine in the coming weeks. The forthcoming reports will give key insights into the health of corporate America—and the market’s reaction to the companies’ performance.

We will continue to watch political and market developments and how they affect our overall economy. In the meantime, we encourage you to keep a focus on your long-term goals and the strategies that can help support your financial life.

ECONOMIC CALENDAR

Monday: Housing Market Index
Tuesday: Housing Starts, Industrial Production
Wednesday: Beige Book
Friday: Existing Home Sales

April 2017 Market Update Video

In this month’s video, I will discuss some of the major headlines that influenced markets over the past month. In addition, I share three signs of the tremendous economic progress the US has made over the past 8 years  — and provide insight into what these developments could mean for you as an investor.

If you have any questions about your portfolio after viewing this video, please give us a call at 419-425-2400, or send us an email. We would love to talk with you.

Special Quarterly Update: Stocks Post Strong Gains In Q1

The first quarter of 2017 is now behind us, and although we won’t have complete economic data for a while, we do know that domestic stocks had a solid start to the year. Last week, major indexes took a pause from some recent gains and began the second quarter of 2017 with less than thrilling performance. The S&P 500 lost 0.30%, the Dow was down 0.03%, the NASDAQ gave back 0.57%, and the MSCI EAFE declined 0.72%. For this week’s update, we’re going to examine what happened to markets in the first quarter.

How did markets perform in Q1?

All three major domestic indexes posted sizable gains in the first three months of 2017:

  • S&P 500 up 5.5%
  • Dow up 4.6%
  • NASDAQ up 9.8%

As we mentioned last week, the NASDAQ’s nearly double-digit growth represented its best quarter since 2013.

However, the majority of the markets’ gains happened in January and February. While the NASDAQ increased 1.48% in March, the S&P 500 stayed flat and the Dow lost 0.72% in the same period.

Which stocks outperformed in Q1?

Large cap stocks—companies with more than $5 billion in market capitalization—drove much of the growth we saw last quarter. Tech stocks performed especially well, gaining more than 12% over the quarter. In fact, S&P Info Tech, which tracks information technology stocks in the S&P 500, was the quarter’s highest performing sector index.

How did politics affect market performance in Q1?

As the new presidential administration came to power last quarter, investors closely followed policy news and headlines. We encourage you to pay more attention to economic fundamentals than media reports, but we understand that completely ignoring political conversations would have been challenging in Q1.

Overall, investor expectations for the new administration’s pro-growth policies helped push the markets to numerous record highs last quarter. However, when Congress chose not to vote on the American Health Care Act, market concerns increased about whether new policy changes would actually occur. The Dow lost 317 points the week of the expected—but cancelled—healthcare vote.

How high was volatility in Q1?

Even though policy debates have seemed to heighten the emotional landscape this year, the VIX measure of volatility recorded its lowest Q1 average ever. The 11.69 level is also the second lowest quarterly average since 1990.

What might be on the horizon?

Earnings season is upon us, and investors will be watching to see whether reports match expectations. According to FactSet, the S&P 500’s estimated earnings growth rate for Q1 2017 is 8.9%—which would be its best year-over-year earnings growth since 2013. Only a handful of S&P 500 companies have reported their earnings so far; of these reports, 57% exceeded the mean sales estimate and 74% exceeded the mean earnings-per-share estimate.

In addition to earnings, the Federal Reserve’s interest-rate decisions will be on many people’s minds throughout 2017. After raising rates on March 15, the Fed expects at least two more increases this year. So far, the markets absorbed these increases well, with the Dow even gaining 100 points on the Fed’s last meeting day.

Ultimately, we have many data points, policy updates, and economic indicators to focus on in the coming months. As of now, 2017 has started with strong market performance, high consumer confidence, and low volatility.

ECONOMIC CALENDAR

Tuesday: JOLTS
Wednesday: Import and Export Prices, EIA Petroleum Status Report
Thursday: PPI-FD, Consumer Sentiment
Friday: Consumer Price Index, Retail Sales, Business Inventories