Zach's News

MARKET COMMENTARY

As we transition from summer to fall, domestic and international stock markets have performed well mostly due to improved economic conditions. Focusing here in the U.S., we continue to see good job growth, low unemployment, and low inflation which is keeping more money in consumers' pockets. As I mentioned in our last newsletter, our markets would continue to move higher if our corporate earnings would continue grow. This is exactly what they've done. Not only did earnings grow by more than 10% in the 1st quarter, they are also on track for 10%+ growth for the 2nd quarter, with more than 80% of companies reporting. 

Markets here domestically could be even higher if not for the gridlock in Washington. With optimism through the roof earlier in the year due to the pro-growth initiatives the Trump Administration clamored for, the House of Representatives and the Senate have unfortunately done much of nothing during the first 6 months of the presidency. While some deregulation has helped our businesses, major sticking points remain in both healthcare and tax reform. We believe that it's unfortunate that our elected officials, on both sides of the isle, would rather sit on their hands and pout rather than work together to make real change for America and its people. Although there hasn't been much progress made so far, we are confident that most of the pro-growth agenda will get done in terms of corporate tax reform, infrastructure spending, repatriation of corporate debt, and more deregulation to allow businesses to run more efficiently while still having the proper checkpoints in place. With no specific timeline on when this might be, markets would welcome progress and we believe would take the next step higher. 

Moving quickly overseas, we continue to see growth in Europe, Asia, and Emerging Market countries, as policy continues to improve and central banks begin to normalize interest rates. Although these markets have largely outpaced the U.S. stock market year-to-date, there is still room to move higher as international markets remain “relatively cheap” compared to the United States.

The Federal Reserve has also continued on their normalization policy of interest rates, increasing rates another 0.25% in June. Remember, interest rates are historically low all over the world, so any rate rise at this point is a way for policy to get back to a neutral stance. The Fed has also stated that they will begin purchasing back their debt created through the years of “Quantitative Easing”. As long as they don't get too aggressive with the pace of rate rises and bond buying, we feel confident that it shouldn't become an issue for the stock market. Most analysts believe that the Federal Reserve will raise interest rates one more time in 2017.  

What I'm sure most of you are concerned about are some of the geopolitical issues arising in the Middle East and North Korea, and the potential impact it could have on our lives and the markets. While it is something we are monitoring, investing or not investing based on “what-ifs” is a losing proposition. While we don't have a crystal ball to predict the future, we can pray tensions won't escalate more than where they are currently and stay the course. There is a good chance that we see increased volatility in the markets during times of geopolitical tension.

I hope you find this information helpful. Please call me if you have any questions or concerns, 920.272.2273 or email, zachary.jaro@raymondjames.com.

Zachary R. Jaro
Financial Advisor
Cape Financial Group
2345 E Mason St. Green Bay, WI 54302
P: 920.272.2773 | F: 920.272.2277
zachary.jaro@raymondjames.com

The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any opinions are those of Zachary Jaro and not necessarily those of RJFS or Raymond James. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility.