November 1, 2017 | What happened in October? In a month dominated by political news and anticipated legislative changes, U.S. Read More
February 1, 2017 |
What happened in January?
The post-election stock market rally continued in January up until the last few trading sessions of the month. Investor optimism and the appetite for risk could be waning after a disappointing start to earnings season and the unknown financial impact of the recent political policy changes.
Despite the marginal pullback, major U.S. stock indices finished January in positive territory for the first time since 2013. International stocks, which stalled after the U.S. election, gained favorably in January thanks to strengthening macroeconomic data coupled with strong corporate earnings and weaker currencies.
For the month, U.S. equities (S&P 500 Index) returned +1.9%, with international stocks (MSCI ACWI ex-U.S.) +3.5%. U.S. bonds, measured by the Barclays U.S. Aggregate Bond Index, advanced a marginal +0.2% and global bonds (JP Morgan Global Aggregate Bond Index) +0.8% in the month.
Moving into February
We entered January 84% equity invested and quickly increased exposure as sentiment and technical indicators improved. Even though U.S. equity valuations remain stretched, strong macroeconomic data coupled with supportive sentiment and technical indicators provide a ‘risk-on’ approach in the near term. While there is mixed reaction to current policy action by the Trump administration, indication still leads to an economic policy that supports infrastructure spending and reduced regulations which have historically indicated future growth. We enter February in a bullish posture with over 90% equity exposure to both U.S. and international equities.
↓ Valuation | U.S. stock valuations remain stretched with P/E multiples above 20 as stock prices rose in the face of a disappointing earnings season.
↑ Macroeconomic | The U.S. economy continues its slow-and-steady growth pace with low unemployment, improved retail sales and a rebound in home-building.
↑ Sentiment | U.S. Purchasing Managers Index (PMI), an indicator of health in the manufacturing sector, grew for a 5th straight month in December to 54.7.
↑ Technical | Momentum remains in positive territory with the S&P 500 Index 1% above the 50-day moving average and 4% and 6% above the 100-day and 200-day averages, respectively.
Important Disclosure Information
As of 1/31/2017. 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.