March Market Review from Sumner Wealth Management

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- MARCH 2017 -

 
 

 In This Edition:

  • FED'S RATE
  • By the NUMBERS
  • About SWM

 

 

Market Performance

Stock Market

FEBRUARY

 YTD '17

12 MONTH

 Total U.S. Market1 +3.72% +5.67% +26.29%
   Domestic Large Cap Equity2 +3.97% +5.94% +24.98%
   Domestic Small Cap Equity3 +1.93% +2.33% +36.11%
 International Equity4 +1.59% +5.19% +19.31%
   Developed International Equity5 +1.43% +4.37% +15.75%
   Emerging Market Equity6 +3.06% +8.70% +29.46%

Fixed Income

FEBRUARY

 YTD '17

12 MONTH

 U.S. Investment Grade Bonds7 +0.67% +0.87% +1.42%
Cash Equivalent8 +0.04% +0.08% +0.32%
1Russell 3000 2S&P 500 Index 3Russell 2000 Index 4MSCI ACWI ex-U.S. Index 5MSCI EAFE Index 6iShares MSCI Emerging Markets Index 7Barclays Capital U.S. Aggregate Bond Index 8Barclays Capital 1-3 Month U.S. Treasury Bill Index   
 
 

Dear Visitor,

The economy by all appearances has made really good progress: Job gains have been quite solid, and the unemployment rate is now in line with the Fed's estimate of normal long-term levels. Meanwhile, inflation continues to rise toward the Fed's target of 2% a year.

What was less certain entering the fed meeting was how much the Fed's expectations for the path of future rate hikes had changed. When we look at the survey of Fed officials rate forecasts, known as the "dot plot," there was little change. The median expectation was still for two additional quarter-point hikes in 2017, and three in 2018, though there was a slightly higher expectation for 2019.

The Fed also indicated a willingness to let inflation rise slightly above the bank's 2% target. Overall, it appears to be pretty consistent with market expectations going into the meeting.

KEY POINTS:

  • The Fed raised interest rates at the March meeting, the third rate hike in this cycle.
  • Fed surveys suggest two additional rate hikes in 2017, which was unchanged from December.
  • Fed rate hikes most directly affect shorter maturity bonds.
  • Longer dated bonds may not see rates rise to the same extent.

.

By the NUMBERS:

1. EIGHT YEARS OF GAINS - The ongoing bull market for the S&P 500 reached 8 years in length as of the close of trading on Thursday 3/9/17. Over the 8 years, the index has gained +314.4% (total return), an average annual return of +19.4% (source: BTN Research).

2. NO BIG DAILY DROP - As of the close of trading last Friday (3/10/17), the S&P 500 has gone 103 consecutive trading days without suffering at least a 1% decline over any single trading day. That's the longest stretch the stock index has gone without a 1% drop since it had a run of 105 trading days without a 1% tumble that ended on 12/15/95 or more than 21 years ago (source: BTN Research).

3. DON'T WORRY ABOUT IT - Legislation signed into law by President Barack Obama on 11/2/15 (i.e., more than 16 months ago) suspended any debt ceiling limit until 3/15/17, i.e., Wednesday of this week. Our national debt was $18.5 trillion on 11/2/15. Our national debt was $19.9 trillion last week (source: Treasury Department).

4. AND BORROW WE DO - The yield on the 10-year Treasury note closed at 2.58% on Friday 3/10/17. The yield on the 10-year Treasury note closed at 4.59% on 3/10/07. Thus for the same annual cost of money, our government can borrow +78% more money today than we did 10 years ago (source: BTN Research).

5. DISCRETIONARY VS. MANDATORY - Over the next decade (fiscal years 2018-2027), estimated discretionary spending by the US government will total $13 trillion, an amount that is dwarfed by the government's $34 trillion of projected mandatory spending (source: Office of Management and Budget).

6. A LOT IN A FEW - Less than 2% of the banks and savings institutions in the United States hold 82% of the deposits maintained in FDIC-insured institutions nationwide as of 12/31/16. There are a total of 5,913 banks and savings institutions holding $16.8 trillion of deposits as of the end of last year (source: FDIC).

7. US AND THEM - China has a target of +6.5% for economic growth during calendar year 2017. The United States has achieved year-over-year growth of at least +6.5% just once in the last 50 years, i.e., growth of +7.3% during calendar year 1984 (source: National People's Congress).

8. TAKES BOTH COMPONENTS - GDP growth of +3% per year, a goal of the Trump White House, could be achieved with +2% productivity growth (output per hour per worker) combined with +1% labor force growth (source: Department of Labor).

9. LAND OF LINCOLN - Illinois, a state considering an income tax increase, has $12 billion of unpaid bills owed to vendors that provide services to the state (source: State of Illinois Comptroller). 

10. PAPER OR PLASTIC? - Total credit card debt in the United States dropped in January 2017 to $995 billion, the first month-over-month decrease since February 2016. The peak in credit card debt nationally was $1.022 trillion in April 2008 (source: Federal Reserve).

 

About SWM

Our firm assist individuals, families, and businesses in proactively preparing themselves for a broad range of financial decisions and life events by helping our clients gain income protection, financial stability, with a solid plan.  We are an Integrated,  Wealth Manager Specialists. 


Mark Sumner
Financial Advisor

 

Sumner Wealth Management, Inc.          
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