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Despite recent turbulence in the stock market, the major indexes wrapped up the First Quarter of 2017 on a positive note. For the three months ending March 31st, the S&P 500 and Dow Jones were up 4.65% and 3.93%, respectively, while the NASDAQ had its best quarter since late 2013, achieving an 8.89% return. Despite some bouts of volatility, such as the Dow posting its longest losing-streak since 2011, the quarter was mostly marked by gains. In February, the Dow closed at an all-time high for a record-setting 12 days straight.

Wall Street also celebrated several milestones: The Dow crossed both the 20,000 and 21,000 levels for the first time, and the bull market turned eight years old on March 9th. The bull market has lifted the Dow an incredible 14,300 points, while the S&P 500 has more than tripled! 

The technology sector continued to hold the top spot for investors thanks to stronger earnings, compelling valuation, and emergence of new technology such as wearables, VR headsets, drones, and virtual reality devices. Additionally, the sector is benefiting from the rising interest rate scenario and Trump's proposed corporate tax reform, which could allow companies to bring back cash being held overseas at lower rates.

The biotech sector made a strong comeback this quarter driven by attractive valuations, robust earnings results, as well as Trump's move to reduce drug regulations and push for faster drug approvals. Additionally, encouraging industry trends, including the possibility of increased M&A activity, an accelerated pace of innovation, promising drug launches, and cost-cutting efforts are fueling growth in the sector. Toward the end of March, House Republicans shelved their bill that was supposed to replace the nation’s healthcare system. While the market initially reacted negatively, it has since regained its composure and is higher by roughly 1% since March 25th. David Joy, chief market strategist at Ameriprise Financial, said "Wall Street is still giving the administration the benefit of the doubt that they'll get something done on tax reform. The market has hung in there.”

The materials sector got a bump from rebounding commodity prices, positive developments in China, pick-up in global manufacturing activities and improving global trends. Additionally, Trump's pro-growth policies to revive U.S. manufacturing and rehabilitate the country's aging infrastructure added to its strength. Particularly, gold recorded the biggest quarterly gain, roughly 8%, since the first quarter of 2016 and represents the eighth first quarter gain in 10 years. Volatility, fears over political instability and revived Chinese demand bode well for the yellow metal in the quarter. Additionally, the Fed's less-than-expected hawkish outlook ushered a strong momentum in the space.

The Fed raised interest rates by 25 basis points to a range of 0.75 – 1% toward the beginning of March. The Federal Open Market Committee (FOMC) indicated that job gains remained solid and the unemployment rate was little changed in recent months. Janet Yellen stated, “Inflation has increased in recent quarters, moving close to the FOMC’s 2% longer-run objective.” Despite the hikes, the 10-Year and 30-Year Bond Yield remained relatively unchanged, dropping -2.04% and -1.31%, respectively, during the first 3 months of 2017.

The MSCI Emerging Markets Index did remarkably well gaining 11.17% in Q1. Developing-nation stocks are on its longest winning streak in seven months, and Mexico’s Peso and South Africa’s Rand led a measure of emerging currencies to the highest level since May 2015. “The global recovery is getting stronger and even Europe is showing some signs of life,” said Hertta Alava, the head of emerging markets at FIM Asset Management Ltd. in Helsinki. “There was a little bit of weakening at the end of February, but investors are back in the game. This environment is good for risk sentiment.”

After experiencing a solid bump in value versus the world’s leading currencies immediately after the election, the value of the U.S. Dollar declined slightly in 2017. It is down 1.40% versus the Euro through the first quarter of 2017 while the Dollar has fallen even more against the Yen, down 4.46%. A strong Dollar brings less expensive imports, but makes American goods and services less competitive abroad, and shows foreign earnings less valuable when translated into Dollars.

The international market has tracked closely with the U.S. market. The MSCI EAFE Index closed the month at 1,792.98, up 6.47% from its 2016 close of 1,684.00.

After a late rally last year that pushed oil prices up 45% for 2016, the market has stalled this year due to a continuing - though dwindling - oversupply.
In 2017, despite a recent decision by OPEC to cut production, the combination of increased U.S. production and a seasonal spike in U.S. stockpiles helped drive down oil prices into the high $40's through most of March. By the close of the month, however, the price had edged back up to $50.60 per barrel (West Texas Intermediate Crude), but the price was still down 5.81% through the first quarter.

We continue to monitor the political and economic landscape in both our local and overseas markets. If you have any questions about your portfolio investments or the current state of the markets, please do not hesitate to reach out at any time.

Sources: 

http://money.cnn.com/2017/03/31/investing/trump-rally-first-quarter-wall-street/ 

http://money.cnn.com/2017/03/09/investing/bull-market-anniversary-8-year/?iid=EL 

http://www.nasdaq.com/article/best-etfs-stocks-from-top-sectors-of-q1-cm769065#ixzz4dNtM1OdS 

http://www.nasdaq.com/article/best-etfs-stocks-from-top-sectors-of-q1-cm769065#ixzz4dNtAZquZ 

http://www.nasdaq.com/article/best-etfs-stocks-from-top-sectors-of-q1-cm769065#ixzz4dNtf7dHE 

https://www.bloomberg.com/news/articles/2017-03-21/fed-relief-turns-investors-focus-to-emerging-economies-in-bloom 

https://www.thriventfunds.com/insights/market-update/1st-quarter-2017-recap-tech-stocks-lead-strong-market.html 

https://www.thriventfunds.com/insights/market-update/1st-quarter-2017-recap-tech-stocks-lead-strong-market.html