May provided a bumpy ride for investors. However, by the end of the month, most of the indexes posted monthly gains with the exception of the Russell 2000, which lost over 2.0%.
Despite terrorist attacks, mundane oil prices, a rocky first quarter in Washington, and a slowdown in economic growth, U.S. stocks closed the month in positive territory, spurred by generally favorable quarterly corporate earnings reports.
First quarter earnings and revenues surprised on the upside. This continues a multi-quarter rebound, allowing for continued market strength.
Domestic large-cap stocks have outperformed small-cap stocks, and we expect this trend to continue.
Valuations appear to favor lower yielding sectors and therefore we expect growth stocks to outperform value stocks. This is reflected in our recent asset allocation changes.
The global economy is picking up steam. We recently increased our international equity exposure based on improving growth prospects and attractive valuations.
Emerging market equities have continued to climb for the year. Their rise has been partly driven by an increase in earnings. Valuations have also picked up, although they still do not look especially high.
Expansion of the U.S. economy slowed over the first three months of 2017. The first-quarter 2017 gross domestic product grew at an annualized rate of 1.2%.
The Fed left rates unchanged in May, and indicated there will be two more hikes in 2017. We expect modest changes in bond yields due to subdued inflation and growth expectations.
- This information has been compiled using data and other statements of fact derived from sources which we believe to be accurate and reliable. However, such data and other statements of fact have not been verified by us, and we do not make any representations as to their accuracy or completeness. Any opinion expressed herein reflects our judgment at this date and is subject to change.