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Monthly Newsletter

January 1, 2018

Which Sectors Will Lead Stocks Higher In The New Year?

2017 was a stellar year for equity investors, as US stocks advanced on the order of 20% and many foreign stock markets did  even better.  Fixed income investors had to settle for more modest gains.  The 10 year Treasury began the year yielding 2.45% and ended the year pretty much at the same point, at 2.40%.  Traditional bond funds showed a total return of 2.5 to 4.0% while multi-sector bond funds and high yield funds were able to return closer to 6-8%. 

Putting it all together, our balanced portfolios showed substantial gains last year, the 9th year of the bull market.  Will 2018 be the bull market’s 10th year?  The title of this letter implies that stocks can continue to climb in the new year.  It appears that some of this year’s gain were brought back into 2017 as the anticipation of the passage of the new tax bill and then the eventual passage pushed stocks to new highs in the last few weeks of the year.

After all of the excitement of last year, I would anticipate that the markets will need some time to catch their breath (I know I will).  2017 saw a steady climb throughout the year, without more than a 3% pullback.  It was an extraordinary year that saw sizeable gains with remarkably low volatility.  We would be naïve to expect a repeat of that this year.  However, at the risk of jinxing our good fortune, I would say that there is no reason not to expect stock markets around the world to continue to march higher. 

As I have mentioned before, it might be our 10th year of the bull market but for foreign markets, it is basically year 2.  The global recovery is just getting started.  We forget that it wasn’t that long ago that fears of default in Greece and in weak banking systems in Italy and Spain led to broad sell-offs in our markets.  It is now been several years since we have heard about troubles in Europe.  The Eurozone is now doing very well, with growth seen as on par with ours. 

Prior to last year, emerging markets faced a head wind of a strong dollar, making their economic recoveries more difficult.  However, 2017 saw the US dollar fall almost 10% relative to other currencies, creating an environment that helped emerging markets flourish. 

With global markets moving ahead nicely, it reduces the chances of a recession in the US, the most likely cause of any US stock market correction.  Last  year saw strong earnings growth among US corporations.  Forecasts for 2018 are for this trend to continue.  The impact of the new tax bill can only be a positive for this trend.

If stocks do continue higher this year, the challenge will be to identify those areas of the market that will be most profitable.  Last year, our bias for growth stocks definitely added to our performance.  Among bond funds, the performance of our non-traditional funds proved very beneficial.  The jury is still out on foreign funds.  While they got off to a very strong start in 2017, they definitely cooled off in the latter half of the year.

My guy Steve Sjuggerud was concerned a few months ago that one of his market indicators had turned negative.  The action of the Dow Transports had weakened.  However, that has completely turned around as the Transports have hit record highs.  He now feels that not only can 2018 be another good year for stocks, but that this bull market can last through 2019 or even 2020.  Talk like that tends to get me nervous and get my defenses up.  But we’re still invested and taking advantage of any more gains to come.

New Addition – The Feldman family added a new member last month as our daughter Sarah Carlton had a baby girl, Vivian.  Vivian is our fourth grandchild.  Our oldest daughter Canaan has 2 boys and Sarah now has 2 girls.  Thank you to all the well-wishers!         Jeff Feldman

                        Happy Holidays and Best Wishes for a Happy and Healthy New Year!


Market Data - 1/1/18  

Dow Jones                  S&P 500             NASDAQ          Russell 2000              10 Yr Treas

   24,719                           2,674                  6,903                   1,536                          2.40%

     Earnings Yield (S&P)                           Gold                         Crude Oil
           5.24%                                              $1,305                           $60.10


JANUARY 2013           JANUARY 2014                JANUARY 2015             JANUARY 2016                   JANUARY 2017
FEBRUARY 2013        FEBRUARY 2014              FEBRUARY 2015           FEBRUARY 2016              FEBRUARY 2017

MARCH 2013              MARCH 2014                 MARCH 2015               MARCH 2016                MARCH 2017

APRIL 2013                   APRIL 2014                       APRIL 2015                      APRIL 2016                     APRIL 2017
MAY 2013                     MAY 2014                           MAY 2015                        MAY 2016                        MAY 2017

JUNE 2013                   JUNE 2014                         JUNE 2015                      JUNE 2016                       JUNE 2017


JULY  2013                  JULY 2014                      JULY 2015                   JULY 2016                    JULY 2017

                                                                                                                                                                                                             AUGUST 2013              AUGUST 2014                     AUGUST 2015                 AUGUST 2016               AUGUST 2017

SEPTEMBER 2013    SEPTEMBER 2014          SEPTEMBER 2015       SEPTEMBER 2016      SEPTEMBER 2017

OCTOBER 2013           OCTOBER 2014                OCTOBER 2015                  OCTOBER 2016            OCTOBER 2017

NOVEMBER 2013          NOVEMBER 2014             NOVEMBER 2015              NOVEMBER 2016         NOVEMBER 2017

DECEMBER 2013           DECEMBER 2014              DECEMBER 2015             DECEMBER 2016         DECEMBER 2017











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