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Mid-Year Review 2017

Gimme Some Truth

If you missed it, last week’s “Gimme Some Truth” was our biggest yet! We brought in our first-ever guest, Megan Jerabek of von Briesen to discuss estate planning. Check it out here!

This week, we take a look at some important numbers  – 401K, 403B, 457…find out what they all mean on this week’s episode, live on both iTunes & SoundCloud.

Mid-Year Review 2017

As we approach the end of the first half of the year (where does time go!?), here’s a little mid-year review of where we stand for 2017. The funds or benchmarks we describe are not necessarily in our client’s portfolios but given for context.

What is doing well?

Stocks are doing well across the board. U.S. large cap stocks (represented by the ETF SPY) are up about 10% on a total return basis, and international developed (EFA) and emerging markets (VWO) are up almost 13% and 14% respectively.  U.S. small cap stocks (VB) continue to lag large companies with a return over 5%.

Bonds have been dull, boring, and consistent, which is exactly why you own them. Despite short-term interest rates increasing, U.S. bonds (BND) have increased almost 3% on a total return basis while international (BNDX) have returned about 1.5%.

What is not?

Commodities continue to struggle, with most diversified commodity ETFs (DBC, DJP) down over 10%. The exception, gold (GLD), is up over 7% at the time of this post.

Alternative strategies such as managed futures (WDTI) are down slightly at around 5%, and volatility funds are struggling mightily, with one commonly used fund (VXX) down 50%.

What should we be watching closely?

Legislation: Healthcare legislation, tax reform, the September debt ceiling increase, and the Russia probe all will impact the stock market to varying degrees.  The likelihood that both healthcare and tax reform gets done before the end of the year is fairly slim due to the hurdles facing the legislative process. Although the Republicans hold the majority, it is highly unlikely that any bipartisan legislation will come through Congress. This adds a significant layer of complexity to the process, as the tax reform bill must score out as revenue neutral. Should the Republicans fail to advance their agenda the stock market would likely react negatively.

Geopolitical Events: Rising tensions with North Korea and Russia will be closely watched.  Should there be an escalation in military response to either or both of these countries we could see a pullback in equity prices due to the uncertainty of the situation.

Earnings: Earnings have moved out of their softness of the last couple of years and have been strong.  Corporate profitshave accelerated since the third quarter of 2016.  Should this continue the outlook at equities will remain positive.  f earnings start to slide backwards we may see a reaction to that in stock prices. Right now the economic data does not indicate a recession on the near-term horizon.

Interest Rates: The Fed has indicated that the economy is on more solid footing with its move to increase interest rates. Positive unemployment data and increasing inflation continues to support the case for increasing interest rates. It appears that the Fed will increase rates slowly and at a very measured pace.     

Hopefully, you found this mid-year review/market update helpful. If you have any questions or concerns, don’t hesitate to reach out or schedule an appointment. We hope to see you soon!