Stocks: A Mid-Year Review

Paul Ohanian

Founder and CEO, Scottsdale Wealth Planning, Inc.

As 2Q 2017 draws to a close and with it a half year of attention-grabbing headlines of stock market highs – what’s next? At this point in the year, I have observed the highlights of 2017 without succumbing to the temptation of trying to predict what may be an uncertain future. With that said, here is my assessment of the markets to date.

The Up Market

So far the year 2017 has seen major indices like the S&P 500 and Dow Jones Industrial Average record all-time highs, only to keep rising1. Big name tech stocks like Apple and Google have enjoyed momentous upswings in share price, the latter hitting $1,000 in early June2. But for all the headlines sparked by domestic markets, they were well outperformed by International and Emerging Markets. Those markets closed 1Q 2017 with significantly higher returns, a trend that appears to be holding through 2Q 2017. Interesting to note, the real “winners”3 of these non-US markets in the first quarter of this year were Spain and Singapore in Developed Markets (14.02 percent and 13.20 percent, respectively), and India and Poland in Emerging Markets (18.85 percent and 18.46 percent respectively.)4 Which countries will dominate 2Q 2017 and the rest of the year is anyone’s guess.

The Down Market

U.S. Small Caps (generally, companies with a market capitalization of between $300 million and $2 billion) underperformed throughout 1Q 2017and into 2Q 2017, some sectors (like Value) are posting negative returns. Small Caps had risen more than 15 percent during the last 3 months of 20165, and 2017 may just be a reaction to the dislocation in prices. Interest Rates are also down. Major sectors of the market had already projected rising interest rates in 2017, leaving little uncertainty that the Federal Reserve would take action. Unexpectedly, interest rates have been mixed, sliding in certain sectors of the bond markets (like long-term government debt)6 and along with it, the U.S. dollar. Finally, Oil continues to struggle. This remains good news for the American consumer, who pays less at the pump, but the uncertainty posed by unstable demand and oversupply also confirms Oil is the wild card of 2017 markets.

Future Markets

While it is always interesting to follow investment news day-to- day, month-to- month or even quarter-to- quarter, only with the benefit of hindsight do we feel we know whether any time period was a good one to be invested. The future is always uncertain. A thoughtfully constructed, well-diversified portfolio is key to capturing the opportunities that will provide positive returns for a long-term gain.

Information is at a period in time and subject to change. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Information contained in this article is for informational purposes only and should not be considered investment advice. Advice may only be provided after entering into an advisory agreement with Scottsdale Wealth Planning. Scottsdale Wealth Planning’s current Disclosure Brochure is set forth on Form ADV Part 2 and is available for your review upon request.

Paul Ohanian is founder and CEO of Scottsdale Wealth Planning, Inc. an Old Town-based registered investment advisor and Certified Financial Planner® with more than 25 years of experience in providing financial services to the Valley. Visit him at scottsdalewealthplanning.com

1 At the time of writing, the S&P 500 hit a record high of $2,440 on 6/9/2017, and Dow Jones Industrial Average (^DJI) recorded yet another record intra-day trading high of $21,277 on 6/12/2017. The Dow broke $20,000 for the first time in January 2017. 2 Alphabet, Inc. (GOOGL) broke $1,000/share on 6/5/2017. 3 The highest country performance in US dollar terms. 4 Country performance based on respective indices in the MSCI World ex US IMI Index (for developed markets) and MSCI Emerging Markets IMI Index. All returns in USD and net of withholding tax on dividends. MSCI data © MSCI 2017, all rights reserved. 5 21.31% at 12/31/2016, up from 6.16% at 10/31/2016, as measured by the Russell 2000 Index. 6 US long-term bonds, bills, inflation, and fixed income factor data © Stocks, Bonds, Bills, and Inflation (SBBI) Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield).