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May 2017 Month in Review
If you received our timely Intra-Month Review in May we addressed the substantial drop in the market on May 17th of approximately 1.9% (Russell 3000). A very political event in nature and not a reflection of how the market truly looked. We re-warned people not to have the herd mentality and to stick with their longer-term growth approach. For all you investors who followed our advice you made out fine for the rest of the month, with the S&P 500 and Russell 3000 rallying 2.40% and 2.28% respectively. This put a final tally for the month at 1.41% for the S&P 500 and 1.02% for the Russell 3000. The US Aggregate Bond index also fared well with a 0.65% total return1. Because you have already heard from me once on May, I will keep this Month-in-Review brief.
With 1st quarter earnings season fully completed this month, our end result was very positive and the sentiment in all the quarterly earnings calls was as well very positive. If you measure the difference between positive words and negative words in morning calls (yes there is software out there that actually does this) you can see that over the last 5 quarters, the number of more positive words than negative has increased at a phenomenal pace. Match that with the increased earnings reports and corporations are not only performing well, but increasing their confidence too and this bodes well for short-term trends2.
All eyes look forward to the Fed and a near certain rate hike that has not only been priced in by the market, but telegraphed by Janet Yellen and her team. We continue to expect the Fed to increase rates at a more normal pace than the last few years as wage and inflation rates continue to stabilize.
As we head through the “Sell in May” ideology, we come to a more historically boring month of June. With the Fed set to increase rates, and many policy issues not fully understood, this June should prove to be more exciting than most, which will hopefully create positive momentum and help diminish the mentality that you can only make money in the markets in certain calendar months.
As always, please contact us if you would like more information about how we think.
AGH Wealth Management
1 Morningstar Office™ values as of 05/31/2017
2 LPL Research Weekly Commentary, May 30th 2017 Publication
The economic forecasts set forth in the article may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Investing involves risk, including the loss of principal. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results.