June 2017 Market Update – During the first few months of the year, market returns were strong while the trend of modest economic growth continued. For the month of May, the S&P 500 Index returned 1.41% while the FTSE All Word Ex-US Index increased 3.26%. Year-to-date through May 31st, the S&P 500 delivered 8.66% and the FTSE All World Ex-US was up 13.89%. The strength in international markets supports our prior communications that we believe there is opportunity in the international and emerging markets.
Investors are focused on the geo-political backdrop on a national and international level. Skepticism over the Trump administration’s ability to deliver on pro-growth policies, growing scrutiny over White House ties to Russia, and escalating risks of global terrorism are all detractors from investor confidence.
The latest U.S. economic data has been mostly positive, though growth has been slow. Despite equity market strength, bond yields are low, which could suggest slowing of the economy and a tightening labor market. Per the latest jobs report from the U.S. Bureau of Labor Statistics, total non-farm payrolls increased by 138,000 in May, and the unemployment rate was little changed at 4.3%. Real gross domestic product (GDP) increased at an annual rate of 2.1% in the first quarter of 2017, according to the second estimate by the Bureau of Economic Analysis. Though GDP growth did slip in the first quarter, we believe this to be transitory as the slip can be mostly attributed to low inventory in the first quarter. Oil fell to $47.66 per barrel, and the dollar dropped to a seven-month low against the Euro. Though valuations are rich, earnings in Q1 were strong.
The Fed will meet on June 14th to determine if an interest rate increase is necessary. Despite softer employment numbers and an inflation rate below the 2% target, we believe that there may be 1-2 more rate hikes this year.
Internationally, there are developments that could affect the markets going forward. Trump’s decision to exit the Paris Climate Agreement could adversely affect U.S. alternative energy and tech companies and U.S. products in the international space. China’s manufacturing numbers are strong, while there is uncertainty around North Korea.
We continue to believe that a long-term perspective and a diversified portfolio will benefit investors. If you are a client and would like further detail on these topics or anything else, please don’t hesitate to call or email us. If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or visit www.callancapital.com.
Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov.
S&P 500®: Standard & Poor’s (S&P) 500® Index. The S&P 500® Index is an unmanaged, capitalization – weighted index designed to measure the performance of the broad US economy through changes in the aggregate market value of 500 stocks representing all major industries.
The FTSE All-World ex US Index comprises Large and Midcap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.