What happened in December?
Post-election market momentum continued into December as global equities advanced over the course of the month despite the Federal Reserve decision to raise interest rates and a final-week pullback.
U.S. equities (S&P 500 Index) advanced +1.9% in December while international equities (ACWI ex-U.S.) gained almost +3%. For the year, U.S. stocks rose +11.2% while the international market was up +4.5%.
The fixed income market had a more muted result than equities. After a strong start to the year, bonds declined throughout the 2nd half. The Barclays U.S. Aggregate Bond Index ended the year +2.7% while the JP Morgan Global Aggregate Bond Index was +2.2%.
Moving into January
Even though U.S. equity valuations widened throughout the year, strong macroeconomic data, supporting sentiment indicators, and positive technical momentum continued to provide a foundation for stocks to advance. Much is still unclear about future fiscal, trade, or tax policy but the available data remains relatively bullish in the short-term for U.S. stocks. The same is true in our international exposure, as we maintain a bullish posture.
NorthCoast Navigator
|
Negative Indicators |
Positive Indicators |
|
|
|
Valuation U.S. stock valuations ended the year at their highest levels as stocks rose in the midst of declining profits. Forward P/E also ended at a yearly high of 18.8.
|
Macroeconomic The U.S. macroeconomic pictures remained stable as unemployment decreased to 4.6% while the U.S. created 178,000 jobs in November, in line with the 2016 average. |
Sentiment Investors again gathered into equity funds (SPY) in December, increasing flows at +6.6%. The UM Consumer Sentiment survey reached its highest level of the year at 98.2. |
Technical Relative strength remained positive as the S&P 500 Index ended the month 2% above the 50-day moving average and 5% above the 200-day providing momentum into the new year. |