A May Overview

After a three-month reprieve, the markets look as though they have found their footing.  Domestic and most international equity markets have moved to new highs.  Interest rates have stayed relatively low and this has acted as a catalyst for investors.  There are a few things that stand out to us about this market and the global economies:

  1. Europe has overtaken economic leadership from the US.  In the first quarter of 2017, Europe’s economy grew at an annualized 2% rate, which outstripped the US economy at 0.7%. It’s good to see that Europe is finally picking up steam. 
  2. A wide disparity in interest rates exists around the world.  In the US, the FED has started raising rates and will diligently continue raising for the foreseeable future.  In Europe, the EU has kept rates down. This trend may change if Europe continues to improve.
  3. Unknowns remain with the new administration.  President Trump is attempting to lower tax rates and it appears the domestic equity markets are pricing that in.  If rates are not reduced, it could cause a dip in stocks. 

We are encouraged by what we see in the global economies.  For the first time in a long time, the rest of the world seems to be waking up.  This type of global improvement could help sustain growth and create a more consistent environment for development. 

A April Overview

The markets have rallied to new highs in the last month, with the rally very broad in nature.  Most major indexes have jumped to new highs and we are continuing to see leadership in the Technology and Financial Services sectors.  If the economy continues to improve, this rally could continue, albeit with some bumps in the road. There are a couple of thoughts we have regarding this market and the economy:

  1. One of the big question marks last year was Brexit (Great Britain leaving the European Union).  The UK’s vote to detach sent global markets lower.  However, European economies have continued to expand and this looks like a “non-event” to long-term economic growth.
  2. The earnings season has been very good in the US and the numbers have surprised to the upside. The media likes to attribute this post-election rally to the results.  But, beneath the surface, the rally is being driven by an accelerating global economy and better earnings.
  3. We cannot help but think that the next economic slowdown will come from rising interest rates.  This won’t play out in the short-term.  Inflation will act as a catalyst for higher rates and we will be watching very closely as we move forward.  

The markets are currently in rally mode and it’s a welcome change from the crazy volatility we experienced last year.  That being said, we would expect volatility to rear its ugly head at some point this year.  But, we believe the path of least resistance is still up.  So, we will look to use market volatility to our favor.  

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