Wait, it's April already??
It's difficult to believe it's already April. As my Grandmother used to say, the Fourth of July is just around the corner.
Here's a three-point summary of the first quarter:
- Markets are up in the U.S. thanks to expectations of lower taxes and less regulation. A strong technology sector helped, too.
- The Federal Reserve continued on its path to rate normalization by raising the target Federal funds rate by 0.25%.
- The broader economy is strong and showing signs of increased stability as job growth continues at a faster pace than in 2016, consumer sentiment strengthens, and home prices continue to rise.
Q1 2017 Numbers
The benchmark S&P 500 gained 5.5%, which isn't too shabby. This was bolstered by strong performance in the tech sector, but offset slightly by weak performance in the energy sector.
The average diversified U.S. stock fund, which is a more holistic measure of how we actually invest, gained 4.8%, slightly lagging the market. It's interesting to note investors are exercising caution and are more likely to invest in bonds rather than stocks. For comparison purposes, $112 billion flowed to bond investments versus #34 billion to stocks. This is in stark contrast to the last quarter of 2016 when investors flocked to stocks following the results of the U.S. election.
The average diversified international stock fund gained 8% in the first quarter. This is likely due in large part to a strong dollar, which incentivizes foreign companies to export goods to the U.S.
The average intermediate-term bond fund returned 1% during the first quarter, down from 3% in the previous quarter.
Expectations for the Second Quarter
Corporate earnings growth is forecasted by many analysts to rise about 9%. Many companies will report their first quarter earnings in the coming weeks, so we'll see if the forecasts match reality. If earnings match expectations, the market could continue to break records. Of course, there will always be unforeseen events that will shape investor behavior.
During the first quarter, the financial sector lagged all others except for energy and telecom. That could change in the second quarter as rising interest rates and decreased regulation should lead a rebound in the financial sector.
Listening / Reading / Watching
Here's what has my attention right now:
- Anything related to Tesla because the company has a lot going on right now. Tesla's stock price is up 40% year-to-date, the Model 3 is entering the release candidate phase of development, and a new line of electric trucks will be unveiled in September. In addition, Tesla Energy is ramping up its Powerwall 2, Solar Roof, Powerpack, and a newly announced conventional solar array. As a company, Tesla recently became more valuable than Ford and GM, making Tesla the most valuable automaker in the U.S. That's crazy considering, among other things, Tesla's limited production capacity.
- Fortitude on Amazon Prime Video. Long-time readers probably know I'm a sucker for sci-fi. I recently stumbled across this series and I'm really enjoying it. Bonus: It was filmed in Iceland, so the scenery is gorgeous.