A Note From Our CIO - Q1 2017
What a difference a year makes. After the first four trading days in 2016, the S&P 500 Index was down 5%, in reaction to concerns about China, Fed rate hikes, and U.S. economic strength. No such issues in 2017— the stock market is higher, the economy is solid, and all eyes are focused firmly on President-elect Trump. Fiscal issues look poised to outweigh monetary issues, and that is a good thing. Let’s let the central bankers move off center stage.
2016 demonstrated the limited value of predictions and polling — consider Brexit and the U.S. presidential election. That said, our prediction for 2017 is positive. As you will read in more detail in this publication, we are especially positive on U.S. large cap and small cap equities; we are much more cautious on bonds and on international large cap and small cap stocks. Risks abound — unmet expectations for President Trump’s fiscal and tax plans, potential trade wars, an unexpectedly hawkish Fed, to name a few—but we feel the risks are outweighed by the potential.
The top questions we are hearing from clients concern the investment impact of a Trump administration, the risk of rising interest rates, and stock market valuations. These are factored into our outlook, and we will share additional thoughts in 2017.
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