For the first quarter of the new year Sloy, Dahl & Holst, Inc. picked up right where we left off. Trump Trade is in full effect with domestic equities continuing their post election run. People are hopeful and full of expectation for a more business friendly economy. The current equity market run is due to the chance of tax reform, a rollback of the current heightened regulatory environment, and meaningful infrastructure spending. Though as we’ve seen in recent weeks that just because these reforms are on the agenda of the new administration doesn’t mean it will be accomplished overnight. The markets are sitting at all time highs, but expectations are being reset with Trump Trade stalling. Soon we will hit earnings season which is always the most important data for stocks.
Below are the returns of five major indexes for the first quarter:
BarCap US Agg Bond +0.82%
S&P 500 +6.07%
Russell 2000 +2.47%
MSCI EAFE (Europe) +7.25%
MSCI EM (Emerging Markets) +11.45%
We are looking forward to another solid earnings season moving forward. We expect even stronger support for the stock market coming from corporate guidance that will be very optimistic. Though investors are nervous due to the markets sitting at all time highs, we must always remember that markets tend to disappoint the majority.
We have consistently stuck to four major themes throughout the past four years. Our allocations have focused on protecting against a rising rate environment, financial and energy sectors, and the long term value for investors within international markets. Those who have been patient are starting to see the benefit as these themes turn together.
The S&P 500 has been performing the best over the last seven years. But this run is on the heels of a decade of being negative year after year. We know that investment cycles can take a very long time to play out, and reversion to the mean is real. While other investors will chase the S&P and further push the theme of Passive/Index investing, we will act contrarian. Our overblown move into Passive investing will ultimately bode well for active management and the allocations of our portfolios.
We thank you very much for your support and confidence, as always. Please reach out to us directly, we are always here to answer your questions.