Quarterly Market Review: January-March 2017
The Markets (as of market close March 31, 2017)
Riding the momentum following the presidential election, stocks surged for much of the first quarter of 2017. Buoyed by the anticipation of tax cuts and policies favorable to domestic businesses, the benchmark indexes listed here reached historic highs throughout the quarter. At the end of January, the Dow reached the magic 20000 mark for the first time, while the tech-heavy Nasdaq gained almost 4.50% for the month. The trend continued in February, as stocks posted solid monthly gains. The Dow closed the month with a run of 12 consecutive daily closings that reached all-time highs. The S&P 500 also achieved a milestone — 50 consecutive trading sessions without a daily swing of more than 1.0%. At the close of trading in February, each of the benchmark indexes listed here posted year-to-date gains, led by the Nasdaq, which was up over 8.0%.
March began with a bang but ended with a whimper. The Dow closed the first week of the month at over 21000, while the Nasdaq gained over 9.0% year-to-date. However, energy stocks slipped as the price of oil began to fall. Entering mid-March, investors exercised caution pending the potential Fed interest rate hike and the push for a new health-care law. Following its mid-March meeting, the Fed raised interest rates 25 basis points, while the move to replace the ACA with a new health-care law failed for lack of congressional support.
For the quarter, each of the indexes listed here posted impressive gains over their fourth-quarter closing values. The Nasdaq climbed the most, posting quarterly gains of close to 10.0%, followed by the Global Dow and the S&P 500, which achieved its largest quarterly gain in almost two years. Long-term bond prices increased in the first quarter with the yield on 10-year Treasuries falling 6 basis points. Gold prices also climbed during the first three months of the year, closing the quarter at $1,251.60 — about 8.5% higher than its price at the end of the fourth quarter.
Market/Index
| 2016 Close | As of March 31 | Month Change | Quarter Change | YTD Change | |
|---|---|---|---|---|---|
| DJIA | 19762.60 | 20663.22 | -0.72% | 4.56% | 4.56% |
| NASDAQ | 5383.12 | 5911.74 | 1.48% | 9.82% | 9.82% |
| S&P 500 | 2238.83 | 2362.72 | -0.04% | 5.53% | 5.53% |
| Russell 2000 | 1357.13 | 1385.92 | -0.05% | 2.12% | 2.12% |
| Global Dow | 2528.21 | 2691.45 | 1.36% | 6.46% | 6.46% |
| Fed. Funds | 0.50%-0.75% | 0.75%-1.00% | 25 bps | 25 bps | 25 bps |
| 10-year Treasuries | 2.44% | 2.38% | -1 bps | -6 bps | -6 bps |
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Monthly Economic News
- Employment: February's employment report showed continued strengthening in the labor sector with 235,000 new jobs added in the month, on the heels of 238,000 new jobs added in January. Job gains occurred in construction, private educational services, manufacturing, health care, and mining. The unemployment rate dipped to 4.7% — down from 4.9% a year earlier. There were 7.5 million unemployed persons in February. The labor participation rate inched up 0.1 percentage point to 63.0%. The average workweek was unchanged at 34.4 hours in February. Average hourly earnings increased by $0.06 to $26.09, following a $0.05 increase in January. Over the last 12 months ended in February, average hourly earnings have risen by $0.71, or 2.8%.
Eye on the Month Ahead
The first quarter of 2017 proved to be a banner three months for equities. The FOMC next meets during the first week of May, when it will consider another interest rate hike. If employment remains strong and consumer prices trend higher, the Fed may raise the target range rate to 1.25% following their next meeting, with at least one more rate increase likely before the end of the year.
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Solares Hill Advisors, 847 Washington Street, Holliston, MA 01746 v.617-306-1572