September 30, 2017 | INVESTOR’S BUSINESS DAILY | NorthCoast loads up on Canadian ETF, keeps European Exposure.
March 1, 2017 |
What happened in February?
Positive momentum continued in global equities as U.S. and international stocks advanced for a 4th and 3rd straight month, respectively. The S&P 500 Index gained on 18 of the 21 trading days in February. The shortened month witnessed a reduction in negative geopolitical headline noise and continued positive macroeconomic data releases – U.S. consumer prices (key indicator of inflation) increased the most since February 2013, retail sales gained, and existing home sales rose to their highest level in nearly a decade. Across the pond, U.K. unemployment declined to its lowest rate in ten years, Eurozone PMI increased to a six-year high and Chinese factory activity expanded for an 8th straight month.
For the month, U.S. equities (S&P 500 Index) returned +3.8% and are now +5.9% YTD, with international stocks (MSCI ACWI ex-U.S.) +1.6% in February and +5.2% YTD. U.S. bonds (Barclays U.S. Aggregate Bond Index) advanced a modest +0.7% and global bonds (JP Morgan Global Aggregate Bond Index) +0.5% in the month. Investors who stayed committed to riskier assets like stocks or even rotated out of bonds have certainly benefited during the early going of 2017.
Moving into March
Low interest rates and accommodating fiscal policies continued to buoy stocks. Coupled with the slow-growth environment which has permeated the U.S. and international economies, our short-term outlook remains opportunistic. Investors continue to shrug off the high valuation levels — while 2016 Q4 earnings season provided a modest uptick in earnings, it hasn’t caught up to the escalating stock prices that preceded. Throughout February, we slightly reduced equity exposure in light of heightened stock valuations but macroeconomic, sentiment, and technical factors still indicate a path to equity growth. Moving forward, investors must be diligent and disciplined as new information enters the market.
↓ Valuation | P/E levels ended February at 21.8, in the 84th percentile of 10-year average. Forward P/E moved higher to 18.4.
↑ Macroeconomic | U.S. unemployment remained below 5% while consumer sales advanced and economic indicators moved to annual highs.
↑ Sentiment | Equity fund flows (SPY) turned positive in February as rotation out of bonds-into-equities continued. Manufacturing surveys increased for the 7th straight month.
↑ Technical | Equity momentum powered forward with the S&P 500 Index 3% above the 50-day moving average and 8% above the 200-day.
Important Disclosure Information
As of 2/28/2017. 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.