Performance for Week Ending 3/31/2017:
The Dow Jones Industrial Average (Dow) gained 0.32%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) added 1.02%, the Standard & Poor’s 500 Index (S&P 500) finished up 0.80% and the Nasdaq Composite Index (NASDAQ) tacked on 1.42%. Sector performance was positive with 8 of the 11 S&P sector groups finishing higher. The Energy (+2.2%) sector posted the best gain while Utilities (-1.24%) posted the worst.
||Closing Price 3/31/2017
||Percentage Change for Week Ending 3/31/2017
||Year-to-Date Percentage Change Through 3/31/2017
*See below for Index Definitions
MARKET OBSERVATIONS: 3/27/2017 – 3/31/2017
The major market indices finished the week moderately higher reflecting a rebound in the price of oil and growing hope that tax reform will become a top priority for the Trump administration after healthcare reform was pushed to the back burner. Oil finished the week up by over 5%, its best weekly performance since early January. The gains were driven by speculation that OPEC may extend production cuts that are scheduled to expire in June.
In terms of healthcare reform, it was never really a market event. The only reason that healthcare reform was watched so closely by investors, is that the administration had made it their number one priority, meaning things like tax reform and infrastructure spending would have to wait. Now that the administration has pivoted away from healthcare, pro-growth policies are now being moved to the front of the line. While in today’s political climate nothing is a sure thing, unlike healthcare reform many of these initiatives do have at least some bipartisan support.
For the quarter the S&P 500 gained +5.53%, the best start to the year since 2013 when the S&P added just over 10%. Despite the quarterly gain, the momentum since the election has slowed dramatically. This is best illustrated by looking at the monthly returns since the election: November +3.42%, December +1.82%, January +1.79%, February +3.72%, March -0.04%. The lackluster returns during the month of March reflected the plunge in oil prices during the early part of the month, the underperformance of the Financials sector, and concern over the passage of healthcare reform.
Despite political setbacks and the slowdown in momentum, the market has been generally resilient due to the supportive macro environment The US economy has good momentum and, most importantly, the earnings environment has turned positive, after 5 consecutive quarters of contraction. First quarter earnings season will kick-off in a few weeks and expectations are for the growth momentum to continue.
While the US markets have performed fairly well, the European markets continue to gain steam. During the month of March, the Euro Stoxx 50 gained 6.35% in dollar denominated terms. The renewed interest in Europe seems to reflect fading political concerns, cheap relative valuations, resurgent corporate profitability, and the strengthening economic outlook
The Week Ahead: With the kick-off to first quarter earnings season still a few weeks away, the earnings calendar will remain muted with only six members of the S&P 500 scheduled to report. On the data front, reports of interest include: the March PMI manufacturing index, the March ISM manufacturing index, February construction spending, the March ADP Employment Report, the March ISM non-manufacturing index. On Friday the closely watched monthly payroll report will be released. According to Bloomberg, non-farm payrolls are forecast to rise by 177K and the unemployment rate is expected to hang steady at 4.7%. Also of interest will be Wednesday’s release of the minutes from the March Federal Open Market Committee meeting. Fed Heads will be out and about with 7 speeches scheduled throughout the week.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.
Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Indices do not include any expenses, fees, or sales charges, which would lower performance. Indices are unmanaged and should not be considered an investment. It is not possible to invest directly in an index.
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