This is beginning to sound like a broken record. The S&P 500 was up for the seventh consecutive month. In May, it was up 1.41% with technology continuing to lead the way. Energy was the worst performing sector, plagued with more concerns of a supply glut. On the bond side of the equation, the Barclays US Aggregate Bond index was up 0.77% in May and up an uninspired 2.38% so far in 2017. (1)
Around this time of year, we take stock in what the markets have provided thus far. It is interesting to note that since 1950, any time the S&P 500 has been up over 7.5% after the first 100 trading days of the year, the market has always ended the year positive. In fact, the average annual return of the 23 times this has happened is 23.4%. (2) Although the past can’t predict the future, this is somewhat optimistic that we may hold onto the gains achieved.
Although politically, little has been accomplished, I believe the markets are hopeful of stock-friendly policies down the road like tax reform. After all, this latest bull-run coincides directly with the election results of November. Whether we see increases in earnings or progress in policy changes, there are reasons for the markets to continue rising.
Speaking of policy changes, there are some regulatory rules put in place this June by the Department of Labor (DOL) that will soon change the landscape of financial advisory services. We will update you more as the rules become more defined, but the general intent of the changes are to better protect investors (our clients). In true regulatory fashion, the government-endorsed methods to ensure investors are protected are akin to shooting a housefly with a shotgun. However, we welcome the challenge with our clients’ best interests always in mind.
Our firm has always made recommendations for our clients with their goals and investment objectives as the primary determining factor, so we don’t anticipate significant changes in how we determine which investments or strategies are appropriate for our clients. “Fiduciary” is a term that will be more commonly used after the regulatory changes take place. With the term fiduciary comes greater responsibility for advisors, so we may need to change the way we implement investment strategies going forward. We are looking at solutions that provide better transparency for our clients and continue to allow us to provide the great service that you expect.
There are changes coming, but changes are what keep us young! We will continue updating you in future newsletters or summaries. Of course, call us with any questions or concerns. Until then, don’t forget it is summertime!
1 Thomson Financial
2 First Trust, Talking Points, May 2017