Q3-2017 Investment Management Update

By The Trust Company on October 13, 2017

THIRD QUARTER IN REVIEW

 

Overview– as of market close September 29, 2017


Equities held their own in August, despite hurricanes that devastated several southern states and Puerto Rico, causing extraordinary economic loss. Conflicts both at home and abroad certainly influenced investor sentiment. A late-month rally in August pushed equities ahead of their July values. The Russell 2000 decreased from its July closing value as energy stocks plunged. The Dow and S&P 500 posted marginal gains, while the Nasdaq led the month ticking up 1.27%. Long-term bond prices rose, with the yield on 10-year Treasuries falling to 2.12%, or 17 basis points below July’s end-of-month yield.

Investors regained some of their confidence in September, pushing stocks ahead of their August closing values. Each of the indexes listed here posted notable gains, led by the small-cap Russell 2000, which surged 6.09%, followed by the Global Dow, the Dow, and the S&P 500, each of which closed the month up about 2.0%. The tech-heavy Nasdaq gained a modest 1.05%, yet that index still leads the way for the year, up almost 21.0% over its final 2016 value.

Ultimately, investors saw the benchmark indexes make impressive gains by the end of the third quarter. The Nasdaq and the Russell 2000 posted gains in excess of 5.0%, followed closely by the Global Dow and the Dow. The S&P 500 trailed the other indexes listed here, yet still managed to increase by almost 4.0% over its second-quarter close.


ECONOMIC NEWS

Employment

August saw 156,000 new jobs added, which is a little below the monthly average of 176,000 per month for 2017. The unemployment rate increased slightly to 4.4%, and has been either 4.3% or 4.4% since April. There were about 7.1 million unemployed persons in August. According to the Bureau of Labor Statistics, Hurricane Harvey had no discernable effect on the employment and unemployment data for August.

Notable job gains occurred in manufacturing, construction, professional and technical services, health care, and mining. The labor participation rate was unchanged at 62.9%.


FOMC/Interest Rates

The Federal Open Market Committee met in September following its last meeting in July. Noting moderate economic activity, stagnant inflation, and the temporary effects of two damaging hurricanes, the FOMC left the target federal funds rate range at 1.00%-1.25%. Nevertheless, the Committee indicated that it will remain on schedule to raise interest rates at least once more this year.

 

International Markets

Inflation may be rising in Europe as eurozone wages increased at the fastest rate in more than two years. Despite Brexit, the eurozone economy has grown stronger than expected, which could reduce the need for continued government stimulus. For the year, benchmark stock indexes remain ahead in most foreign countries.


Eye on the Month Ahead

The summer saw the economy slow a bit, as inflation remained relatively stagnant, wages advanced only slightly, rhetoric between North Korea and the United States became testy, and Mother Nature blasted the southern states with two very powerful hurricanes.

Through it all, the stock market continued to enjoy monthly gains, with several of the benchmark indexes reaching all-time highs. The start of the year’s last quarter may see the economy pick up as some economic indicators are projecting. While the Federal Open Market Committee didn’t raise interest rates in September, it most likely will do so during the fourth quarter. Employment is expected to remain steady as it has averaged roughly 176,000 new jobs per month.

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