Humming Right Along
As we enter the homestretch of 2017, markets seem to be humming right along. Across the globe we are seeing improving economic fundamentals and stock markets heading higher. Unlike past few years, the United States is not leading the markets in 2017. Emerging Markets and Developed International Markets have led the way in 2017. While these economies are growing comparable to the U.S., their markets are beginning to catch up to their counterparts in the U.S.
Large Cap US Equites were up 4.48% for the quarter, lagging International Equites which were up 5.40% and Small Cap US Equities which were up 5.67%. The bond markets made reasonable contributions with the Barclays Capital US Aggregate Index returning .85% for the quarter and High Yield returning 1.70%. Again, International Bonds outperformed with a quarterly return of 3.05%.
Looking toward the last quarter of 2017 and the beginning of 2018 we are cautious and hopeful. The long slow economic expansion in the US shows no sign of weakness. As long as profits continue to grow we don’t see a reason that US Equities can’t go higher. The Federal Reserve has raised rates 3 times in 2017, with a 4th expected in December.
We haven’t seen anything un-expected happen in the markets with this movement in short term rates. The market is somewhat cautious about the Federal Reserve beginning to not re-invest the securities on their balance sheet this fall. This will reduce liquidity in the market, but so far this hasn’t scared market participants. We expect that in 2018 and/or 2019 we will see more Central Bank’s begin to shrink their balance sheets.