‘Trump Trade’ is in full effect with domestic equities continuing their post election run on the hope and expectation of a more business-friendly environment.The continuation of the current equity market run can be pinned down to the possibilities of tax reform, a rollback of the current heightened regulatory environment, and meaningful infrastructure spending. Though as observed on the past few weeks, none of the current administration’s agenda will be accomplished overnight. There is no guarantee that the administration’s agenda will come to fruition, and this has put a damper on the markets. While Trump Trade has been stalling, we are going to soon hit earnings season, which is always the most valuable data for stocks.
Below are returns of 5 major indexes through the first quarter:
BarCap US Agg Bond +0.82%
S&P 500 +6.07%
Russell 2000 +2.47%
MSCI EAFE (Europe) +7.25%
MSCI EM (Emerging Markets)+11.45%
We are forecasting to see a solid earnings season going forward, with even stronger support for the stock market coming from corporate guidance that will be full of optimism. While many investors are nervous due to all time highs of the current market, we are confident going forward.
SDH, Inc. has had major themes with our allocations over the last four years: protect against a rising-rate environment, Financials and Energy have upside potential, and the long-term value for investors within international markets rather than domestically. Those who have been patient are beginning to see all of these themes turn together.
In the last seven years, the S&P 500 has been the best performing index by a significant amount. It is important to remember though, that this has been on the heels of a decade when the S&P was actually negative year over year. Reversion to the mean is real, as investment cycles can take a significant amount of time to play out. As many investors continue to chase the S&P and further push the theme of Passive/Index investing, we will act as a contrarian. The overblown move into Passive investing will ultimately bode well for active management and the allocations of our portfolios.
We at SDH, Inc. thank you for your continued confidence and support. As always, please feel free to contact us directly if there are any questions we can answer.