Not a lot really happened in the month of April, except for the fact that we had some really good corporate earnings out. We had a confirmation that first quarter GDP was subpar at best, however, better than last years zero rate.
We have Congress in gridlock over Trump proposals for the tax plan. I know that will come out later this year. The markets are really counting on stimulus from the Trump tax and economic plans. I believe the bull market that is fully intact today should continue through the balance of this year unless something out of left field comes and derails it. Now, what could do that? Obviously, it could be a non-passage of a Trump tax plan, it could be a non-passage of a Trump economic policy, it could be North Korea, it could be something over in Europe; but right now things domestically look pretty good.
Sector Performance for April
Not all sectors, however, faired so well in the month of April. Let’s take a quick look at the sectors for the month of April.
As you can see Consumer Discretionary came in as the best performer at 2.4% and at the bottom we had Energy down -2.95% with Technology coming in as the second-best performer with 2.01%.
If we look year-to-date it’s a similar story, Technology up 12.45%, and take a look at Energy and Financials. Energy down -9.93% on the year, Financials up by only 1.2%.
If we take a look back over a 6-month period, this will take us back to the election, you have Financials at the top of the game, and you can see how Financials really soared after the election, but so far this year have struggled. Energy since the election just up 0.1%, S&P 500 up about 14.16%, and again Financials are the big winner since the election up 20.73%.
Indices Performance for April
As far as the major indices go for the month, the NASDAQ Index no surprise the big winner, up 2.73%. The Dow Jones Industrial Average in second place at 1.33%. SmallCaps however continue to lag, up just 0.87% and the MidCap up just 0.78%.
Let’s take a look at these same indices year-to-date, and as you can see, NASDAQ higher by 14.78%, S&P 500 up 6.51%, Dow Jones Industrial Average 5.86%, and Russell 2000 and S&P 600 SmallCap still lagging on a year-to-date basis.
If we go back and take a look a the indices in a 6-month period like we did with the sectors, what we see is that the Russell 2000 and the S&P SmallCap since the election have been right up there with the NASDAQ. It’s just that this year those indices have struggled just a little bit. I wouldn’t ditch SmallCap altogether now, what I would do is maintain a well-diversified portfolio.
10 Year Treasury Performance for April
Let’s look at fixed income. Interestingly enough, through the month of April the yield on the 10 Year Treasury actually declined. We finished the month at about 2.30% as you can see above.
On a year-to-date basis, the yield on the 10 Year Treasury is also down, as you can see above. This in the wake of the second interest rate hike in just a quarter from the Fed.
So, the question is, why are the 10 Year Treasury yields falling while the Fed is raising the short-term rate? It’s really pretty simple. The 10 Year Treasury is telling us that inflation and money velocity are not yet out there. We’re going to continue to keep a close on those things because at some point in the not-so-distant future, I’m thinking late this year maybe early next year, we should start to see that 10 Year Treasury yield sneak up a little bit. However, I don’t think we’re going to see anything around the 3% range this year.
Thank you, as always, for joining me for this Monthly Economic Update for April 2017. I encourage you to make sure you’re speaking to your advisor to make sure that your portfolio is aligned with what you need your money to do.
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