Smooth Operator

Smooth Operator

The S&P 500 returned 3.7% while the broader MSCI All-World index gained 3.0% in July, recording the strongest gains for stock markets since January and putting the S&P within 50 points of its all-time highs. Monetary policy changes are underway and, for now at least, the economy and the markets are relatively undisturbed.

Glass Half Empty

Choppy markets continued in April. After all the large swings, the S&P 500 ended with a modest gain of 0.4% for the month, leaving the index down 0.4% for the year. Developed international markets beat domestic stocks with the MSCI EAFE index gaining 2.4% in April. Emerging market equities, feeling currency pressure and geopolitical tensions, pulled back in April but show small gains for the year.

More Tariffs in Town

In January, enthusiasm for economic growth and pending US tax cuts lifted the S&P 500 5.7%. February brought talk of trade wars, higher interest rates, and the return of volatility as major stock indexes declined 10% from highs before ending the month with a 3.7% loss on the S&P 500.

Double Whammy

Stocks gave back a large part of their gains from January. The S&P 500 ended February down 3.7% after briefly pulling back 10% from the highs reached in January. Interest rates increased for the sixth straight month, with the yield on the 10-year Treasury finishing at 2.87%, the highest since 2013.

Jubilant Start, Shaky Finish

After an enthusiastic start to the year driven by an accelerating global economy and optimism about a large corporate tax cut, the stock market gave back some of its gains last week. The S&P 500 finished January with a 5.7% advance, including dividends. After a shaky finish, January’s returns were still one of the best starts for stocks since our firm’s founding in 1987.

Bountiful Year

2017 was filled with worries about an impending nuclear showdown, the fragility of the Chinese economy, and the next tweet from President Trump. As it turned out, all that was beside the point. What really mattered in 2017 was a strong and increasingly synchronized global economy. Companies posted record profits and created jobs faster than they could find willing and able workers while the stock market set new records almost daily.

Animal Spirits

Global economic data continues to exceed expectations, throwing more fuel on this year’s stock market rally. Domestic stocks touched new highs again in November on tax reform optimism, driving the S&P 500 index to a record 13th straight month of gains. For the year, the S&P 500 shows a 20.5% return, including dividends.

And On It Goes

For weeks now, devastation and risk have surrounded us. Missiles fly over Japan and hostile rhetoric continues, while Texas faces a tragedy of biblical proportions. Yet the financial markets appear unfazed by recent events, with stocks continuing to post new highs. Investors question if the market will continue to be immune to these and other risks.

The Daily Grind

September ended with the S&P 500 index increasing 2.1%, continuing a pattern like the previous eight months of 2017 by calmly grinding higher. Despite a weather-ridden jobs report today, solid economic numbers and consistent U.S. corporate earnings supported the market in the face of ongoing tensions over North Korea.

Immune to Risk?

For weeks now, devastation and risk have surrounded us. Missiles fly over Japan and hostile rhetoric continues, while Texas faces a tragedy of biblical proportions. Yet the financial markets appear unfazed by recent events, with stocks continuing to post new highs. Investors question if the market will continue to be immune to these and other risks.

Chugging Along

Markets abroad led stocks higher in Q2, continuing the trend from Q1 as signs of global economic activity improved further. Developed markets outside the US gained over 6.4% while the S&P 500 chugged along gaining 3.1%. So far for 2017, emerging markets have outpaced everything, gaining over 18%.

Ignoring the Noise

May felt a lot like April as stocks shook off more political noise to finish the month with modest gains. International markets continued to lead stocks higher despite some potential hiccups - most notably a re-emerging political crisis in Brazil. The Bovespa index fell over 8% in one day as the latest political corruption threatened to bring down Brazil’s new president. With R$2.37 trillion, the Bovespa is the world’s 13th largest stock exchange.

Geo-Jitters, Again

Volatility returned to the financial markets in April. Geo-political concerns were focused on rising tensions in North Korea, French elections, bombing in Syria, and the souring of the Putin/Trump bromance. Domestically, there was the threat of a government shutdown and uncertainty around the prospects for a Trump tax plan.

Peso Fuerte

The S&P 500 gained 6.1% in Q1, after eking out a small 0.1% return in March. But it was the international markets that stood out. Emerging market equities gained 11.5% in Q1 and the developed markets outside the US added 7.4%. Some of the outperformance resulted from the pullback of the mighty US dollar, giving foreign investments an added boost from the currency appreciation.

Trumpflation Update

Stocks added to their gains in February. The S&P 500 recorded an additional 4.0% return, putting the index up 5.9% for the year. The bond market saw some reprieve as treasury yields fell and the broad U.S. bond market gained 0.7% for the month. Those in the financial markets looking for a give‐back in the so‐called Trump reflation trade were disappointed as pretty much all broad asset classes showed positive returns.

Dow Twenty Thou

In January, the U.S. equity market continued its momentum from the 2016 year-end rally. Large cap stocks gained 1.9% and the Dow Jones Industrial Average finally crossed the symbolic 20,000 level. Some of the so-called “Trumpflation” trades retreated in January. Bond prices recovered some previously lost ground as the yield on the 10-year Treasury fell. Fears of increased protectionism and adverse effects of a stronger dollar abated, helping emerging markets and international stocks outperform the S&P 500. After leading the market higher post-election, U.S.-centric small-cap stocks underperformed to start 2017.

Post-Truth

In the end, what can be said about 2016? Unpredictable, perplexing and stunning come to mind. By any reasonable standard, the events of the past year were certainly unexpected, at least politically. At the beginning of 2016, it was not possible to envision a scenario where the UK would vote to leave the European Union and the U.S. would elect Donald Trump as the 45th president. Still, both happened and in hindsight, there were global signals that a populist uprising was at hand.