Thursday, February 1, 2018

Investment Perspectives: Growth, Decline and Positive Market Returns

This Investment Perspective touches on the Tax Cuts and Jobs Act of 2017, a difficult start for U.S. bonds, and volatility in the stock market in the last week of January.

You can read the full Investment Perspectives here.

In this month's issue:

“Business Booster"
Mark Luschini
Among other things, the Tax Cuts and Jobs Act of 2017 has the potential to generate significant benefits for corporations and the broad economy. As it relates to corporations, the potential uses include capital spending, mergers and acquisitions, increasing compensation to employees, paying down debt, and returning capital to shareholders via buybacks and dividends. For the broader economy, we expect the fiscal boost to elevate the already above-trend pattern of growth that will push the length of this near historical expansion further out into the future.

“Technicals over Fundamentals”
Guy LeBas
January proved to be one of the worst starts to a year for U.S. bonds in a quarter century. Over the course of the month, 2-year Treasury note yields rose 0.25%, 10-year Treasury note yields rose 0.30%, and 30-year Treasury bond yields rose 0.19%. While the 10-year area was the worst performing part of the yield curve, the relative volatility of 30-year bonds means the last of those yield moves was equivalent to a -3.9% decline in market value over the course of January. That figure makes January 2018 the worst period for long-term bonds since November 2016’s election-related selloff—as well as a sharp reversal of the trend that had been in place throughout the back half of 2017.

“Potential Hesitation, But the Best is Still Ahead"
Greg Drahuschak
Although the stock market had a volatile final week of January, the month ended with three measures of market results in place that often have predicted the market’s direction for the entire year—results that suggest 2018 could be another year of positive market returns in the subsequent 11 months and the full year.