CMW MONTHLY MONEY PULSE™

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June 1, 2018
CMW MONTHLY MONEY PULSE™

This year started out with a bang for the global markets and then appeared to pass out from exhaustion in late January.

It’s no wonder after 18 months of abnormally low volatility that the market was ready to catch its breath. So, what is going on now and how can we expect the remainder of the year to pan out? Have our portfolios really run out of steam?

Let’s look deeper than the daily headline indexes of The Dow and S&P 500:

  • True, the two dominant headliners have been hovering around 1-2% YTD. But, their more detailed cousin US Large Growth stands above 6% YTD
  • Looking deeper to US Mid and Small Growth, we see 4% and 7.5% YTD. Not bad for mid-year.
  • Interestingly, Small Value is at 2.0% YTD, beating both its larger cousins which are struggling to make positive tracks.
  • As of now, two year average trailing returns for all US stocks are between 12-20%!
  • While foreign stocks are struggling more at this point YTD, their two year average trailing returns have precisely the same range.
  • Even fixed income is doing better around the world than has been anticipated!

So what are we to expect going forward? First, the near euphoric sentiment markets were showing at the beginning of the year, which can be death to bull markets, has disappeared and been forcefully replaced with foreboding.

So, we’re back to the kind of grinding advance ‘climbing the wall of worry’. This bodes well in our outlook despite the very present global risks many of these worries are focused on. Between Kilauea, Kim Jong-un and killer earthquake predictions in 2018, we think the wall of worry is plenty of bricks thick. Never mind that strong economic activity has broadly improved since then.

Another strong market indicator is the diminished pricey-ness of stocks. When is the last time you heard ‘the market is overpriced’ or ‘the market is too high’? Most of last year and the beginning of this year analysts and pundits were shouting these lines and telling investors the end was coming!

Analysts often reference P/E ratios, which were about 20 for the S&P 500 – not really that high historically. Now it’s around 17. No more headlines about the overpriced market today. This is good because it gives this market more room to run, potentially. We look to the Leading Economic Indicators which continue to show strong growth through 2018-19.

So, while we’re not predicting returns like last year, we’re not ruling them out! We may see lackluster returns through the whole summer. Or worse, geo-political risks could cause some serious volatility or even threaten the expansion. The good news is those types of risks are always present. Signs that show strength for the global economy and markets remain nearly as strong today as they did coming through last year and into this one. Some even point to more potential!

Indexes are listed in respective order to their reference above: DJ Industrial Average TR USD; S&P 500 TR; DJ US TSM Large Cap Growth TR USD; DJ US TSM Mid Cap Growth TR USD; DJ US TSM Small Cap Growth TR USD; DJ US TSM Small Cap Value TR USD. These materials have been prepared solely for informational purposes based upon data generally available to the public from sources believed to be reliable. All performance references are to benchmark indexes. Performance of specific funds will vary from respective benchmarks. Past performance is not an assurance of future results. Each index cited is provided to illustrate market trends for various asset classes. It is not possible to invest directly in an index. These materials have been prepared solely for informational purposes based upon data generally available to the public from sources believed to be reliable. All performance references are to benchmark indexes. Performance of specific funds will vary from respective benchmarks. Past performance is not an assurance of future results. Each index cited is provided to illustrate market trends for various asset classes. It is not possible to invest directly in an index.