Investing in hedged equity strategies is a bit like running with the bulls: investors love the adrenaline rush of the Read More
April 1, 2017 |
What happened in March?
Stocks pushed higher last week to close the month in positive territory as fixed income remained hindered by increasing interest rates.
While the Trump trade began to lose momentum, continued optimism in expanding global economies propelled equities. For example, while the S&P financial sector (a previous leader of the Trump trade) declined 2.9% in March, the technology sector gained and has been the best performing sector YTD. The recent shift could mean that investors are relying on the data of a growing economy to make investment decisions over the belief in future fiscal policy, which has its uncertainties and doubts.
During the investor shift, stocks remained calm with minimal volatility. The CBOE Volatility Index posted its 2nd lowest quarterly average on record. Surveys in March measuring consumer and producer sentiment, or future growth potential, remained high coupled with macroeconomic data that showed a stable, growing economy in the U.S. and rebounding abroad.
For the month, U.S. equities (S&P 500 Index) returned +0.7% and are now +5.9% YTD, with international stocks (MSCI ACWI ex-U.S.) +2.5% in March and +7.9% YTD. Fixed income remained muted across the globe. U.S. bonds (Barclays U.S. Aggregate Bond Index) declined a modest 0.5% and global bonds (JP Morgan Global Aggregate Bond Index) +0.1% in the month.
Moving into April
While macroeconomic data remained strong, producer and consumer sentiment moved higher in March. The mid-March pullback provided an opportunity to increase our equity exposure and take advantage of the short-term price discount. Even though valuation levels remain a point of concern, the surrounding data points provided a rationale for an almost full investment level. We enter the 2nd quarter 96% invested in both our U.S. and international tactical equity strategies.
↓ Valuation | P/E multiple of the S&P 500 is 21.8, 27% higher than its 10-year average while forward P/E remained at 18.3.
↑ Macroeconomic | Housing starts jumped to an almost 10-year high coupled with a strong labor market and growing inflationary metrics.
↑ Sentiment | Equity fund (SPX) flows increased 1.1%. UM Consumer Sentiment survey improved to 96.9. U.S. PMI dipped from February but remains healthy at 57.2.
↑ Technical | Long-term momentum remained strong with the S&P 500 7% above the 200-day moving average while 1% above the 50-day moving average.
Important Disclosure Information
As of 3/31/2017. Data provided by Bloomberg, NorthCoast Asset Management.
The information contained herein has been prepared by NorthCoast Asset Management LLC (“NorthCoast”) on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. NorthCoast has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information. All opinions and views constitute judgments as of the date of writing without regard to the date on which the reader may receive or access the information, and are subject to change at any time without notice and with no obligation to update. This material is for informational and illustrative purposes only and is intended solely for the information of those to whom it is distributed by NorthCoast. No part of this material may be reproduced or retransmitted in any manner without the prior written permission of NorthCoast. NorthCoast does not represent, warrant or guarantee that this information is suitable for any investment purpose and it should not be used as a basis for investment decisions.
PAST PERFORMANCE DOES NOT GUARANTEE OR INDICATE FUTURE RESULTS.
This material should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or investment products or to adopt any investment strategy. The reader should not assume that any investments in companies, securities, sectors, strategies and/or markets identified or described herein were or will be profitable and no representation is made that any investor will or is likely to achieve results comparable to those shown or will make any profit or will be able to avoid incurring substantial losses. Performance differences for certain investors may occur due to various factors, including timing of investment. Investment return will fluctuate and may be volatile, especially over short time horizons.
INVESTING ENTAILS RISKS, INCLUDING POSSIBLE LOSS OF SOME OR ALL OF THE INVESTOR’S PRINCIPAL.
The investment views and market opinions/analyses expressed herein may not reflect those of NorthCoast as a whole and different views may be expressed based on different investment styles, objectives, views or philosophies. To the extent that these materials contain statements about the future, such statements are forward looking and subject to a number of risks and uncertainties.