The financial markets delivered positive returns in the first four months of the year, as investors watched Trump’s first 100 days. For the month of April, the S&P 500 Index returned 1.03% while the FTSE All Word Ex-Us Index increased 2.20%. Year-to-date through April 30th, the S&P 500 delivered 7.16% and the FTSE All World Ex-US was up 10.30%.
During April, in addition to the healthcare bill, President Trump outlined his proposal on corporate and personal tax cuts. Under the proposed plan, the corporate tax rate would be reduced to 15%. Changes to the personal tax code would include 3 brackets, yet it is unclear at what amount they will start and end. There would be no Alternative Minimum Tax (AMT), no estate tax, no Medicare tax, and a change in deductions. It’s important to remember that these cuts would increase the deficit. As we mentioned in previous updates, though it is unclear what the outcome of the proposed changes will be, we believe that the changes could impact the investment environment, thus it is important for investors to try to remain objective and interpret policies without political biases.
The latest U.S. economic data has been mostly positive, though growth has been slow. Per the latest jobs report from the U.S. Bureau of Labor Statistics, total non-farm payrolls increased by 98,000 in March, and the unemployment rate was little changed at 4.5%. Real gross domestic product (GDP) increased at an annual rate of .07% in the first quarter of 2017, according to an advance 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. In fact, the Federal Reserve said in its last meeting that they believed this number to be transitory. Thus, we expect a few more rate hikes in 2017, and a few more in 2018. The ISM manufacturing index rose to 57.5 from 55.2 in April, which shows, despite the slight drop in the ISM manufacturing index last month, economic growth should rebound in the second quarter.
Globally, manufacturing numbers are strong, especially in Canada, the Eurozone and Australia, which has helped the improvement in the global economy. In France, voters elected centrist Emmanuel Macron over far-right Marine LePen, suggesting that the wave of European populism has come to a halt at least in the short-term.
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 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.