INVESTMENT DIRECTIONS
Quarterly Investment Strategy and Market Analysis
Investment Directions is a quarterly analysis of both current investment strategies and the United States and global economies. The newsletter serves as a way for Altos Financial Management to continue communication with the client.
4th Quarter 2017
THE ECONOMY AND INFLATION
Inflation is much like the bears' porridge in the Goldilocks story. If too hot – as we remember from the gas lines and
double-digit money market rates of the 1970's – the purchasing power of wages, pensions, and savings are quickly
eroded. If too cold – as it is now – economists become wary of weakness in the underlying economies of developed
nations. Currently, central bankers are struggling to get the porridge just right, and these concerns will have important
implications for the future of interest rates both here and abroad.
3rd Quarter 2017
AN EXPANDING ECONOMY
The S&P 500 advanced 2.8% in the second quarter and was up 8.2% for the year, easily surpassing the high that it achieved on March 1st. The Dow Jones Industrial Average ended the first half of the year up 8%, while the Tech-heavy NASDAQ gained 14.1% for the first six months of 2017. After a short pullback, the markets are ready to kick off the second-quarter earnings season. The pullback was due to recent profit taking in some high-flying sectors and a rotation into more reasonably valued areas.
2nd Quarter 2017
TRUMPONOMICS AND TECH STOCKS
With regard to both Trumponomics and the benefits of rising interest rates, we may have to wait longer for results than the initial post-election exuberance indicated. In a series of recent conference calls by banking executives, warnings were given that the effects of lower tax rates and financial deregulation will not appear any time soon. U.S. policy makers are finding that the details of change are often stickier than the intent.
1st Quarter 2017
THE MARKET REACTS TO THE ELECTION OF DONALD TRUMP
In one surprise after another, and against all predictions, the equity markets reacted positively to the election of Donald Trump. Fueled by an improving economy and hopes for more business-friendly policies under a new President, the Dow Jones Industrial Average (DJIA) overcame its worst-ever start to a year and posted its best performance since 2013. The DJIA rose 13.4% for the year, the S&P 500 (S&P) increased 9.5%, and the NASDAQ Composite (NASDAQ) gained 7.5%. Both the S&P and the NASDAQ notched their best gains since 2014. Last year's rally extends the bull market that has tripled the DJIA averages from the crisis years of the Great Recession.