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2017NovemberFinancialMarketUpdate—Dec1,2017
AroundtheWorldLastmonth’scommentaryopenedwithasummaryofthenumberofdailyall-timehighsrecordedbytheS&P500Index3–50closingall-timehighsthisyear(LPLResearch,St.LouisFederalReserve)throughOctober31.WecanaddsevenmorenowthatNovemberhascometoaclose.Shorterterm,improvedoddstheGOPtaxbillwillsqueakthroughtheSenatefueledgainsatmonthend.Butletmequicklyaddthebillstillhashurdlesthatmustbeclearedbeforebecominglaw.Longerterm,it’sstillallabouttheeconomicfundamentals.
November’scommentaryalsohighlightedmoreupbeatprospectsfortheU.S.economy.Butthatisonlypartofthenarrative.ToparaphrasethelatePaulHarvey,“Nowit’stimefortherestofthestory.”Andonethathasaninternationalflair.
Index NovemberReturn* 2017YTDReturn%DJIA1 +3.83
+22.82NASDAQComposite2 +2.17 +27.69S&P500Index3 +2.81
+18.26FTSEDevelopedexNorthAmericaIndex4
+0.99 +21.95
BondYields Yield-%a/oNov30&Change*
Yield-%a/oDec30,20163-monthT-bill 1.29 +0.14 0.51 2-yearTreasury
1.78 +0.18 1.20 10-yearTreasury 2.37 -0.01 2.45 30-yearTreasury
2.81 -0.07 3.06 Commodities Nov30Price,MonthlyChange*
Yearend2016Oilperbarrel5 $57.40
+3.02 $53.89
Goldperounce6 $1,280.20 +10.05
$1,159.10
CharlesSherryDirector,InstitutionalEducationGroupBlueOceanGlobalWealth9841WashingtonianBlvd.,#200
Gaithersburg,MD 20878 Tel:720.308.4560
[email protected]
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Sources:U.S.Treasury,MarketWatch,St.LouisFederalReserve,CNBC,LondonBullionMarketAssoc*Monthly:October31,2017–November30,2017
“GrowthinGlobalEconomyisRobust,”saidaNovember29thstoryintheWallStreetJournal.TheJournalreferencedthelatesteconomicoutlookprovidedbytheOrganizationforEconomicCooperationandDevelopment(OECD)–aninternationalgroupmadeupof35countries,includingtheU.S.Thisyearwe’reseeinggrowthaccelerate
in theU.S.,Europe,Chinaand Japan,according
toOECDdata.Whilechallengesremain,“Globalgrowthisprojectedtoimproveslightlyin2018,butremainbelowthepaceofpreviousrecoveries,”theOECDsaid.TheOctober2017WorldEconomicOutlookfromtheInternationalMonetaryFund(IMF)concurs,addingthatemerginganddevelopingeconomiesshouldseeeconomicgrowthacceleratefrom4.6%thisyearto4.9%in2018.Emerginganddevelopingeconomiesexpandedby4.3%lastyear.It’sanencouragingtrend.Butlet’stakeamomenttodivealittlebitdeeper.Yes,it’sabriefdiveintotheweeds,butitillustratesanimportantpoint.Figure1offersagreatsummaryofwhat’stranspiringglobally.Figure1illustrateswhetherfixedinvestmentis
rising or falling in 45 countries. A quick side note is in order:
Fixed investment is awonky term
thatprimarilyreferstospendingbybusinessesonbuildingsandequipment.Theexpansionorcontractioninspendingbybusinessesissignificantbecauseit
isanimportantdriverofeconomicgrowth.Weseethatspendingplummetedduringthe2009recession.That’snotasurprise.
Wealsoseeareboundastheglobaleconomyexitedtherecession.Butheighteneduncertaintyfollowingthefinancialcrisislimitedtheeconomicupside,thatis,untillatelastyear(IMFdata).
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Figure1:Synchronizedglobalupturn
DataSource:OECDEconomicOutlook--StatisticsandProjectionsasof11.28.17
2017/18areforecasts.Allareforecastssubjecttochange.Currently,allbutonecountryisexpectedtoexhibitgrowthin2017and2018.That’simpressive.PutitintermsIunderstandOkay,Igetit.Thatwasawonkywayofsayingthatprospectsaroundtheworldareimproving,butIfeltitwasimportanttouseanobscurepieceofeconomicdatatographicallydemonstratethebigpicture.Fromamorepracticalstandpoint,fasterglobalgrowthistranslatingintofasterrevenueandprofitgrowthforU.S.companiesthathavemoreworldwideexposure–seeFigure2.
0
10
20
30
40
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
2018
Real(inflation-adjusted)TotalFixedInvestment-
ExpandingvsContractingversustheprioryear
Expanding ContractingCountries
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Figure2:Globaltopsdomestic
Dataincludesover90%ofS&P500firmshavingreportedQ3results
Note:DowJonesIndicesestimatesthatS&P500companiesobtained43.2%oftheirsalesfromoverseasin2016Figure2alsooffersustwotakeaways.First,athrivingglobaleconomycreatesatailwindforearnings,whichsupportsstocks.Second,thesynchronizedaccelerationinactivityaroundtheworldisamajorfactorintheupbeatperformanceofinternationalstocksthisyear.Whileweshouldneverforgetthatunforeseeneventshavethepotentialtoinjectvolatilityintothemarket,includingfailureoftaxreform,theeconomicfundamentals,bothathomeandabroad,havelentsupporttoshares.1TheDowJonesIndustrialsAverageisanunmanagedindexof30majorcompanieswhichcannotbeinvestedintodirectly.
Pastperformancedoesnotguarantee
futureresults.
2TheNASDAQCompositeisanunmanagedindexofcompanieswhichcannotbeinvestedintodirectly.
Pastperformancedoesnotguaranteefutureresults.
3TheS&P500Indexisanunmanagedindexof500largercompanieswhichcannotbeinvestedintodirectly.
Pastperformancedoesnotguaranteefutureresults.
4TheFTSEDevelopedexNorthAmericaIndexisanunmanagedindexoflargeandmid-capstocksprovidingcoverageofdevelopedmarkets,excludingtheUSand
Canada.Itcannotbeinvestedintodirectly.Pastperformancedoesnotguaranteefutureresults.
5NewYorkMercantileExchangefront-monthcontract;Pricescananddovary;pastperformancedoesnotguaranteefutureresults.
6LondonBullionMarketAssociation;goldfixingpricing;Pricescananddovary;pastperformancedoesnotguaranteefutureresults.
Itisimportantthatyoudonotusethispublicationtorequestorauthorizethepurchaseorsaleofanysecurity
2.3%
13.4%
4.2%
10.0%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
MorethanhalfofsalesinUS
Morethanhalfofsalesoverseas
DATASOURCE:FACTSETASOF11.10.2017
Q3S&P500RevenueandEarningsGrowthbyGeography(vsoneyearago)
RevenueGrowth EarningsGrowth
Fig. 2
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notbeacceptedandwillnotbeprocessed.Allitemsdiscussedinthisreportareforinformationalpurposesonly,arenotadviceofanykind,andarenotintendedasasolicitationtobuy,hold,orsellanysecurities.Nothingcontainedhereinconstitutestax,legal,insurance,orinvestmentadvice.DISCLOSURE:Investinginvolvesriskincludingthepotentiallossofprincipal.Nostrategycanassuresuccessorprotectsagainstloss.Pastperformanceisnoguaranteeoffutureresults.Assetallocationdoesnotensureaprofitorprotectagainstloss.Thereisnoguaranteethatadiversifiedportfoliowillenhanceoverallreturnsoroutperformanon-diversifiedportfolio.Diversificationdoesnotprotectagainstmarketrisk.Pleasenotethatrebalancinginvestmentsmaycauseinvestorstoincurtransactioncostsand,whenrebalancinganon-retirement
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inanygivenmarketenvironment.Fixed incomeinvestments are subject to
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risk,marketvaluations,prepayments,corporateevents,taxramificationsandotherfactors.Non-U.S.securitiesmarketsinvolvepossiblygreaterriskofpoliticalinstabilityandgreatercurrencyriskinadditiontohavingbeenmore
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Commodities investments arespeculative and involve special risks
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tomaturity.Alternative investmentsmaynotbe suitable forall
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shouldbeconsideredasaninvestmentfortheriskcapitalportionoftheportfolio.Tacticalallocationmayinvolvemorefrequent
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shouldconsiderthetaxconsequencesofmovingpositionsmorefrequently.Betameasuresaportfolio’svolatilityrelativetoitsbenchmark.ABetagreaterthan1suggeststheportfoliohashistoricallybeenmorevolatilethan
its benchmark. A Beta less than 1 suggests the portfolio has
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itsbenchmark.Pastperformanceisnotaguaranteeoffutureperformance.Differentinvestmentsinvolvedifferentdegreesofrisk,andtherecanbenoassurancethatthefutureperformanceofanyinvestment,security,commodityorinvestmentstrategythatisreferencedwillbeprofitableorbesuitableforyourportfolio.Theinformationhasbeenobtainedfromsourcesconsideredtobereliable,butwedonotguaranteethattheforegoingmaterialisaccurateorcomplete.Theinformationcontainedinthisreportdoesnotpurporttobea
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aninvestmentdecisionanddoesnotconstitutearecommendation.Beforemakinganyinvestmentsormakinganytypeofinvestmentdecision,pleaseconsultwithyourfinancialadvisoranddeterminehowasecuritymayfitintoyourinvestmentportfolio,howadecisionmayaffectyourfinancialpositionandhowitmayimpactyourfinancialgoals.
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