Market Update 3.31.2017

Scott Campbell |

The U.S. stock market started the year just like it finished 2016 – on a tear!  The market was up 5.9% for the first quarter of 2017 and up 17.8% over the past one year.  Remarkable performance!

The market moved on a steady incline for almost the entire quarter, then leveled off towards the end of the quarter.  Many indexes hovered around all-time highs as investors cheered President Trump’s actions to eliminate regulations and promises of tax cuts.  Since the quarter end, volatility has increased slightly as the details and timing of any tax cuts has been unclear.  However, details are due out at shortly and first quarter earnings have been very good so far.  And it is profits that drive the market.

Some investors worry that stock prices are high.  And that the bull market run since the financial crisis has created conditions that are ripe for a correction.  Others argue that stock prices are relatively low given current interest rates.  However, if significant tax cuts are passed relatively soon, the market will respond positively.    

The Fed increased rates, as expected, for the third time in less than 18 months.  The current rate is 0.75% – 1.00%.  Many expect, and the Fed has signaled, two more increases this year.  The market remained calm through the recent rate hike, as the Fed did what was expected by investors.

GDP growth and inflation are both running around 2%.  The new administration is hoping to unleash economic growth through regulation reduction and tax cuts.  The potential for these has fueled the market since President Trump was elected.

Foreign markets did extremely well during the first quarter with global indexes up 8.0% for the quarter and emerging markets indexes up 11.7%

The market should continue to do well in the short term as first quarter earnings continue to be released.  Tax cuts will definitely propel the market upwards.  But the summer is approaching and this has been a volatile time for the market over the last several years.  And the process to pass tax cuts will not be an easy one.  So investors should be cautioned that the current market run may hit some bumps over the summer.