Market Update - May 1, 2017Submitted by Jodi Vleck , Beta Wealth Group on May 1st, 2017
U.S. stocks gained ground during the week ended 04/28 which turned out to one of the best weeks this year, with the Nasdaq and Russell 2000 reaching record highs on a combination of strong earnings and positive election-related news. Kicking off the week were the favorable French election results, which will pit Macron (the mainstream candidate) against populist, protectionist 2nd place finisher LePen during the May runoff finale. From the sector standpoint, growth sectors such as technology, healthcare and consumer cyclicals led the way with sharp gains, while defensive sectors such as telecom and utilities lagged. On the economic front, we had a rather tame Q1 GDP print, alongside mixed housing data and favorable jobless claims data.
Foreign markets fared better than domestic markets influenced in part by positive sentiment, ECB commentary and positive earnings results. As pointed out earlier, France’s election results were the primary catalyst for positive sentiment, driving French and German markets up 6% and 5% respectively, with each of these markets partially helped by a stronger Euro as well. Additionally, the ECB’s commentary that downside risks to the continent’s economy have ‘further diminished’ could quite possibly have helped, although they did not hold back stimulus efforts. Emerging market equities also fared well in a continuation of the year's trends, while Japanese markets lagged.
U.S. bonds suffered slightly on the investment-grade side front as interest rates ticked higher especially on the longer end of the curve, while high yield debt gained ground consistent with stronger Q1 quarterly earnings results. Foreign bonds matched US bond performance in local terms despite spread tightening in Europe post-election, but a weaker dollar also provided a boost to developed and emerging market bond index results.
Real estate markets generally experienced declines in the U.S. led by retail/regional malls, while European real estate performed well in keeping with broader equities. Commodities markets exhibited mixed performance despite the tailwind of a weaker dollar, with the energy segment losing ground for the week.