U.S. stocks advanced on Friday, sending the S&P 500, NASDAQ Composite and Russell 2000 to new all-time highs, buoyed by strength in Financials after President Trump interviewed former Federal Reserve Governor Kevin Warsh as a potential candidate for the Fed Chairmanship. Financials would stand to benefit from Warsh’s views on deregulation, so his candidacy buoyed banking shares to six-month highs. Also lifting equity sentiment last week, Washington D.C.’s so-called “Big Six” leaders from the White House and Congress released a framework proposal surrounding President Trump’s tax cut plans. All three major U.S. equity averages ended positive for the week, month and quarter.
For the week, the S&P 500 rose +0.72%, the Dow Industrials gained +0.25% and the MSCI EAFE (developed international) dropped -0.02%.
U.S. Manufacturing Reaches 13-Year High -- Reuters
“Big Six” Tax Framework Details -- Taximize
Chart of the Week: 3Q 2017 Returns Were Strong Across the Board
Equity assets rallied in the third quarter, with international stocks again leading the domestic (U.S.) equites. Chart 1 shows that emerging market (EM) equities performed best, up nearly 8% for the third quarter, helped by outsized performance in Latin America. Year-to-date (YTD), emerging market equities are up almost 28%, the strongest asset class return of the year. Developed market (DM) equities also had a strong showing, and while improving economic data and earnings expectations have helped to lift international equities, a weaker U.S. dollar has also helped to boost investor returns.
In the U.S., weak inflation caused investors to doubt the Fed's desire to hike interest rates, leading the Bloomberg Barclays Aggregate Bond Index to return just over 0.8%. In equities, small cap stocks outperformed large caps, with the Russell 2000 returning 5.7% for the quarter and the S&P 500 returning 4.5%, breaking a trend from the second quarter, thanks in part to improving economic data and hints of tax reform. Falling interest rates throughout the quarter helped REITs gain 1.1%, and commodities saw a broad-based resurgence after a weak prior quarter, up 2.5%. J.P. Morgan notes that cash was the worst performer of the quarter and is up only 0.6% YTD, proving that getting invested in something is better than not getting invested at all.
Some materials are chosen by the Cetera Investment Management team and summarized by Jason Vitucci who is not affiliated or registered with Cetera. Cetera Investment Management provides investment management and advisory services to a number of programs sponsored by First Allied Securities and First Allied Advisory Services. Cetera Investment Management individuals who provide investment management services are not associated persons with any broker-dealer. International investing involves additional risk, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification.