During the first quarter of this year, stocks continued their upward march, to the
surprise of many investors. The S & P 500 Stock Index was up 6.1%, although
performance across various sectors of the market was quite uneven. While the S & P
Technology Index was up 10.2%, and the Health Care Index up 7.9%, the S&P
Energy Index was down 7.2%. I believe these movements are the result of
investor’s efforts to forecast the impact of expected Trump Administration policy
shifts.
Stocks have had an extended run without a significant market correction. The
popular stock market averages are currently trading close to the high end of their
average range, relative to earnings. A pull‐back of some magnitude would not be
unexpected. However, when current equity pricing is viewed relative to the current
low interest rate environment, stocks look less expensive. In addition, significant
amounts of cash remain on the sidelines awaiting investment and should help to
cushion any downturn. Meanwhile, the strength of the U. S. economy coupled with
the negative interest rate environment in Europe is attracting significant foreign
investment.
In addition to the above factors, several significant international issues are sitting on
the front burner which could impact markets at any time. These include North
Korea missile testing, the ever present Middle East crisis, Iran and BREXIT.
These issues leave us, as usual, with an unpredictable situation. We will continue to
manage portfolios within client guidelines and focus on the individual securities we
hold, while searching for new opportunities.