The first quarter of 2017 is now behind us, and although we won't have complete economic data for a while, we do know that domestic stocks had a solid start to the year. For this week's update, we're going to examine what happened to markets in the first quarter.
How did markets perform in Q1?
All three major domestic indexes posted sizable gains in the first three months of 2017:
- S&P 500 up 5.5%
- Dow up 4.6%
- NASDAQ up 9.8%
As we mentioned last week, the NASDAQ's nearly double-digit growth represented its best quarter since 2013.
However, the majority of the markets' gains happened in January and February. While the NASDAQ increased 1.48% in March, the S&P 500 stayed flat and the Dow lost 0.72% in the same period.
Which stocks outperformed in Q1?
Large cap stocks - companies with more than $5 billion in market capitalization - drove much of the growth we saw last quarter. Tech stocks performed especially well, gaining more than 12% over the quarter. In fact, S&P Info Tech, which tracks information technology stocks in the S&P 500, was the quarter's highest performing sector index.
How did politics affect market performance in Q1?
As the new presidential administration came to power last quarter, investors closely followed policy news and headlines. We encourage you to pay more attention to economic fundamentals than media reports, but we understand that completely ignoring political conversations would have been challenging in Q1.
Overall, investor expectations for the new administration's pro-growth policies helped push the markets to numerous record highs last quarter. However, when Congress chose not to vote on the American Health Care Act, market concerns increased about whether new policy changes would actually occur. The Dow lost 317 points the week of the expected - but cancelled - healthcare vote.
How high was volatility in Q1?
Even though policy debates have seemed to heighten the emotional landscape this year, the VIX measure of volatility recorded its lowest Q1 average ever. The 11.69 level is also the second lowest quarterly average since 1990.
What might be on the horizon?
Earnings season is upon us, and investors will be watching to see whether reports match expectations. According to FactSet, the S&P 500's estimated earnings growth rate for Q1 2017 is 8.9% - which would be its best year-over-year earnings growth since 2013. Only a handful of S&P 500 companies have reported their earnings so far; of these reports, 57% exceeded the mean sales estimate and 74% exceeded the mean earnings-per-share estimate.
In addition to earnings, the Federal Reserve's interest-rate decisions will be on many people's minds throughout 2017. After raising rates on March 15, the Fed expects at least two more increases this year. So far, the markets absorbed these increases well, with the Dow even gaining 100 points on the Fed's last meeting day.
Ultimately, we have many data points, policy updates, and economic indicators to focus on in the coming months. As of now, 2017 has started with strong market performance, high consumer confidence, and low volatility.
Quote of the Week
"Things don't just happen; they are made to happen."
--John F. Kennedy
Golf Tip of the Week
Improve Your Game by Training Your Brain
Being mentally sharp during golf is just as important as the mechanical aspects of your game. When your mind isn't clear - or you're distracted - an extraordinary shot can easily turn into a dud. You can sharpen your game by training your brain to focus. Here are a couple of tips for bringing the right headspace to the course.
- Focus Your Attention
When you are taking a shot, your mind digests the movements you plan to make and then tells your body what to do. Having clarity and confidence as you swing is essential for maintaining fluid control. If you're unsure or feel tentative about your decision, then you'll probably bring a different tempo to your swing - and miss the opportunity to play your best.
Learn to remain present in the moment. Don't consume your mind with thinking about what you did before or what you'll do after this hole. Instead, keep your attention on what you need to do now.
- Look at Moves in Reverse
Sometimes, looking from the starting point of a move can keep you stuck on what to do next. Planning your approach at the tee box gives you multiple steps and potential scenarios and outcomes to consider. You can train your brain to sharpen its focus by thinking first about the last step of your move.
Work in reverse by imagining sinking the putt and consider each shot that got you there. Visualize each move and how they connect to one another. If you feel confident with this visual play, then go ahead and bring it to life.
Financial Question of the Week
What risks do I need to consider when planning for retirement?
A retirement plan can be effected by many unforeseen circumstances, but you should consider five major challenges most retirees face: the potential for outliving one's assets; the threat of rising living costs; the impact of increasing health care costs; uncertainty about the future level of Social Security benefits; and the damage to long-term financial security that can be caused by excessive withdrawals in the early years of retirement. Understanding each of these challenges can lead to more confident preparation.
If you or someone you know needs help analyzing your retirement risks, please feel free to contact me.