February 2017 Market Insight

What happened in February:

• Markets ripped higher in February, as the S&P 500 returned nearly 4%. If US stocks were to generate these returns every month they would compound at roughly 50% yearly, an almost preposterous number.

• Non-US stocks and most bonds posted solid returns from an absolute standpoint (just over 1% and 0.5%, respectively), but continued to lag US large cap stocks significantly.

• Bond yields declined during the month, as the US 10 year yield fell from 2.49% to a close at 2.36%, a nearly 5% reduction. Bond prices rise as yields fall.

Looking ahead:

• An interest rate increase of 0.25% is likely to be enacted at either the March or May Federal Reserve meeting. If the Fed becomes more hawkish than this, meaning they intend to increase rates at a more substantial pace, financial markets may experience greater volatility.

• At this point, corporate tax reform proposed by President Trump has no real public policy associated with it. Until the Affordable Care Act is dealt with, this is likely to remain on the back-burner of congressional action. If no action is taken in the next several months, markets may begin to show signs of distress.

IndexFebruaryYTD 20175 YR AVG
S&P 500 Composite3.97%5.94%14.01%
Dow Jones Industrial Average5.17%5.82%12.77%
Russell 20001.93%2.33%12.89%
MSCI World Ex-US1.15%4.16%4.70%
Barclays US Aggregate Bond0.67%0.87%2.24%
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