The steady bull market—now the second largest—continues. The Dow just had its third nine-day win streak of 2017, which hasn’t happened within a single year since 1955. Can the rally continue? While longer-term technicals do look very healthy, a closer look suggests that it has been a historically long time since even a modest correction, thus increasing the chances of a rise in volatility soon.
In its September 20 policy statement, the Federal Reserve (Fed) suggested that it will increase interest rates once more this year and three times in 2018. But the market is predicting that the Fed will only raise rates two times between now and the end of 2018—and it isn’t even certain that the Fed will raise rates this December, though according to fed fund futures it is likely. One reason for this skepticism is the Fed’s history of being overly aggressive in estimating its own future actions.
Growth has been on a roll. Based on the Russell 3000 style indexes, growth’s 18% year-to-date gain is 14% ahead of value’s 4% advance. Looking further back, this growth outperformance is nothing new. Over the past 10 years, including the entire financial crisis period of 2008 and 2009, growth has outpaced value by about 50% [Figure 1], representing the longest period of growth outperformance since style indexes began to gain a following about 40 years ago. Using Fama-French* data back to the 1930s, before the Russell indexes were created, this is the longest bull market ever for growth stocks
The Federal Reserve’s (Fed) next Federal Open Market Committee (FOMC) meeting will take place on Tuesday and Wednesday (September 19–20) and will be followed by the release of the FOMC policy statement on Wednesday at 2:00 p.m. ET. Along with the statement, the FOMC will release a new set of economic forecasts (gross domestic product [GDP], the unemployment rate, inflation, and fed funds projections, also known as the “dot plots”). Fed Chair Janet Yellen will also hold a press conference—the third of four in 2017—at 2:30 p.m. ET.
The latest edition of the Federal Reserve’s (Fed) Beige Book, released Wednesday, September 6, 2017, continued to deliver a positive view of the U.S. economy. The Beige Book is a qualitative assessment of the domestic economy and each of the 12 Fed districts individually. The report is prepared eight times per year, ahead of each Federal Open Market Committee (FOMC) meeting. We believe the Beige Book is best interpreted by measuring how key words change over time. The qualitative inputs for the September 2017 Beige Book were collected in the weeks prior to August 28, 2017.
As the pace of life tends to pick up in September with kids back at school, the market is following suit with a month packed full of global events. The S&P 500 Index managed another gain in August, marking 10 consecutive months of gains on a total return basis. The global economy continues to improve and corporate earnings have been very strong across the globe, but how much longer can this calm continue? As we enter September, it is important to remember that no month has a worse average return for the S&P 500 (-1.0% going back to 1928*), and some of the most volatile moves ever have taken place this month. To help navigate the current environment, we’ve created this guide to the September 2017 market calendar, providing an overview of the key events.
Investors have become increasingly concerned about the escalating North Korean threats, and understandably so. After initially shrugging off the risk, financial markets have shown increased concern over the past several weeks as the threats have become more direct (Guam) and the range of missile tests has increased (over Japan). In the latest development over the weekend, North Korea conducted its largest nuclear test and claims to have a hydrogen bomb capable of being delivered on a long-range missile. While the future of this conflict is very much uncertain, and we are sympathetic to the potential human impact of military engagement, from a market perspective, a look back at past geopolitical and military events offers a reassuring view