Our June 30^th issue of the Hot List Newsletter provides an overview of the market and economy for the first half of the year. Here are some highlights:

 

• The bull market is getting long-in-the-tooth, but what was characterized as a “Trump Bump” early in the year is now mired in uncertainty that stands in the way of progress on policy reform—particularly as it relates to healthcare and corporate taxes.
• The equity markets have rebounded from any periodic dips, bolstered by underlying fundamentals of a tight labor market, steady consumer confidence and marginal GDP growth. Many view the 4% growth envisioned by President Trump as unlikely, envisioning a rate closer to 2%-3%.
• Upbeat consumer confidence contrasts with tensions overseas. Many international markets are outdoing the U.S. this year after years of relative outperformance of American stocks.
• Year-to-date, the S&P 500 has returned 9.0% (to 2438), the Dow is up by 8.6% (to 21,485) and the Nasdaq has returned 15.8% (to 6302), reflecting continued strength in a handful of large tech stocks. The boost to small-caps ushered in by the new president have since dipped, with the class lagging large and mid-caps.
• The Fed has raised rates twice so far this year (by 25 basis points in both March and June), attributing the move to steady growth in the economy and labor market (core inflation is at just under 2%)–and another hike is expected before year-end.
• The housing market is seeing a tightening of inventory and an uptick in prices.
• Data from the Bureau of Economic Analysis shows that personal income rose by 0.4% in April, reflecting primarily an increase in private wages and salaries. U.S. retail and food services sales for May, however, were down 0.3% from April.
• The market’s volatility has been relatively muted recently, lower than it has been for years. It’s important for investors to keep in mind, however, that the weather can shift quickly–diversification is especially important when things are quiet, to be prepared for the ups and downs that will undoubtedly emerge.
• With the Validea Model Portfolios, the momentum and growth strategies are leading the way so far. The chart below shows the top five performing strategies so far through June 30^th.