January 2017 Market Recap

With a country that seems divided by political lines, there is one thing nearly everyone can agree on: things under President Trump have been anything but uneventful. The President wasted little time in the first days of his term. Beginning with an executive order intended to start the process of repealing Obamacare, President Trump continued with executive orders and presidential memorandums covering a variety of issues including a government hiring freeze, immigration reform, energy reform, and deregulation.

Visitor passes at the White House are in heavy use as President Trump continues to meet with business leaders and executives across a number of industries, including Health Care and Automotives. The Trump administration’s first days in office have also come with opposition, as protesters flooded the streets of Washington DC over inauguration weekend and continued with demonstrations in airports around the country in response to his order that, among other things, bars refugees from seven countries from entering the United States for 90 days.

In response, markets have edged higher since the inauguration with the hopes of a pro-growth agenda focused on corporate tax reform and deregulation, although the road has been a bit choppy so far. Needless to say, the President and his new administration continue to dominate the news cycle.

As the country and the media focus on everything coming from the White House, a flurry of economic data released during the month seemed to take a back seat in the headlines. Results were mixed, yet mostly positive, for the economy. Corporate earnings have shown a strong uptick and retail holiday sales numbers overall showed a strong increase year-over-year. The jobs number came in very strong for January, as 246,000 new jobs were added vs. estimates of 165,000. Consumer sentiment remains positive as well, evident by the slight decrease in the household savings rate. On the flip side, the first numbers for Q4 2016 GDP came in light at 1.9%, missing estimates, and overall GDP for 2016 came in at 1.6%, the lowest since 2011.

As the market expected, the Fed decided not to raise interest rates. Sentiment remains that the Fed will continue its cautious and reactionary approach to raising rates. Language in the minutes was in line with the January economic data, as the FOMC referenced a strengthening labor market and an economy that continues to grow, albeit at a “moderate pace”. However, inflation remained below the 2% target and the Fed opted to hold off on the first hike in 2017.

Despite 2 days of pullbacks to close the month, the markets closed off January in the green as the postelection rally continues on. The S&P 500 finished up 1.79% at 2,278.87 for the month. The Dow Jones Industrial Average finished 0.51% higher, including a 3 day stretch closing above the elusive 20,000 mark. It finished off the month at 19,864.09.The NASDAQ led the way in January, up 4.30%, and the Russell 2000, our gauge of the small-cap space, closed up 0.35%.

Emerging Markets finished up 5.48%.  Growth outperformed Value to start the year as well.

We hope everyone is having a great start to 2017!

This market recap was written by Alex Penta, Capital Analyst Investment Research Team

Advisory services offered through Capital Analysts, Registered Investment Advisor Securities offered through Lincoln Investment, Broker/Dealer, Member FINRA/SIPC. www.capitalanalysts.com 601 Office Center Drive, Ste. 300, Fort Washington, PA 19034 ∙ 800-242-1421 220321 2/2017 Important Definitions and Disclosures The opinions and material presented are provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. As with all investments, past performance is no guarantee of future results. No person or system can predict the market. Neither asset allocation nor diversification guarantee a profit or protect against a loss. All investments are subject to risk, including the risk of principal loss. All Indices, including those defined below, are unmanaged. An investor cannot invest directly in an index. S&P 500 Index is an index of 500 of the largest exchange-traded stocks in the US from a broad range of industries whose collective performance mirrors the overall stock market. The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets. The NASDAQ is an index that tracks the cumulative results on a market capitalization basis of all stocks trading in the NASDAQ system. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The MSCI Emerging Markets Index is an index created by Morgan Stanley Capital International (MSCI) designed to measure equity market performance in global emerging markets.The Federal Open Market Committee (FOMC), a committee within the Federal Reserve System is charged under United States law with overseeing the nation’s open market operations (i.e., the Fed’s buying and selling of United States Treasury securities). Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. Emerging markets are sought by investors for the prospect of high returns, as they often experience faster economic growth as measured by GDP. Investments in emerging markets come with much greater risk due to political instability, domestic infrastructure problems, currency volatility and limited equity opportunities (many large companies may still be “state-run” or private). Also, local stock exchanges may not offer liquid markets for outside investors.

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