Investor confidence of late has been dented but looks to be (generally) holding up.  This story may be one of rotation from sectors into areas that appear to have great opportunity.   U.S. equities gave back their sizeable January inflows, but flows into non-U.S. developed market and emerging market (EM) equities have more than offset the loss.  U.S. investment grade, EM debt and U.S. government bonds have attracted inflows.

For now, Investors remain focused on trade issues where tensions rose near the end of March.  However, last week we saw conditions improve as Chinese officials indicated they may be open to negotiating resolutions.  In theory, the Chinese government has signaled that it will make some concessions.  Such a move would avoid any disruption in the global trade and afford President Trump a political win.  Indeed, we see a full-blown trade war as unlikely.

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Most people would like to see a gain of 21.6 percent on their annual statement. That was the annual return for the Standard & Poor (S&P) 500 Index during 2017. In general, U.S. stock indexes did quite well last year – and the year before, too. For instance, the S&P 500 Index was up 11.8 percent in 2016.1

While no one can invest directly in an index (many mutual fund companies offer index based fund options) recent returns make it easy to understand why U.S. stock markets have been popular with investors.  Morningstar reported record amounts of money flowed into various types U.S. stock investments during 2017.2  Was this a result of the proverbial “herd mentality”?  Whenever large numbers of investors are doing the same thing, we believe a prudent course of action is to step back, take a breath, and evaluate the situation. Here are two questions that investors should consider:

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Friday’s bond market sell-off was likely precipitated by a strong non-farm payroll report for January which showed 200k new jobs as well as a positive December report.  Adding to inflation concerns was the report’s reading on wages, which grew at an annual 2.9% rate.  The Fed left interest rates unchanged after last week’s FOMC meeting, but their statement pointed to inflation risk in 2018.  They also noted that consumer spending was “solid” (versus their former description of “moderate”).

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As everyone knows, stocks went into a dramatic spiral on Monday, February 5th, as the DJIA plummeted almost 1,600 points, which was the biggest point decline in history. But right before the market closed, buyers charged back into the market and limited the damage – but the DJIA still lost 1,175 points.

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Happy New Year and best wishes for a healthy and prosperous 2018.  Many of our clients learned about Bitty & Beau’s Coffee during the holidays.  This amazing story continues to draw attention.  We recently learned that Subaru will be matching (dollar for dollar up to $50,000) all contributions through January 7,2018.  Visit their website to learn more www.bittyandbeauscoffee.com

Market Review – The last trading day of 2017 began on a high note with stocks surging.  The ascent was fleeting as stocks retreated for much of the day.  The selling intensified late in the day and left major benchmarks at their lows. The Dow Jones Industrial Average and S&P 500 both ended down 0.5%, while the Nasdaq Composite fell 0.7%. Light trading for the holiday-shortened week left declines of 0.1% for the Dow, 0.4% for the S&P 500 and 0.8% for the Nasdaq. But the benchmarks all had solid performances for 2017, closing with price gains of 28.2% for the Nasdaq, 25.1% for the Dow and 19.4% for the S&P 500.

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It’s that time when we bid farewell to the current year and begin the banalities of resolutions. Whatever yours happens to be, we wish you great success.   Perhaps more importantly, OmniStar wishes you a new year of happiness, success and good health.  Enjoy the last Market Perspectives of 2017 and we look  forward to sharing the next edition in February  2018.

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Market Review

Stocks continued their climb on Friday following strong earnings from the Technology sector. The Nasdaq (tech heavy index) climbed 0.7%, while the S&P 500 added 0.3% and the Dow Jones Industrial Average followed with a 0.1% gain. Another healthy earnings season is winding down and Q4 is underway. If we use history as our guide, November and December tend to be good months for investors.  Nevertheless, 2017 has already provided noteworthy performance. Year-to-date gains are now 25.7% for the Nasdaq, 19.1% for the Dow and 15.6% for the S&P 500.

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Markets reacted positively last week to the long awaited outline of President Trump’s tax reform. Affectionately known as the “reflation trade”, risk-on sectors reengaged and outperformed, but small cap stocks and the technology sector were the brightest stars. Reaching the close on Friday, the Nasdaq Composite gained 1.1% and S&P 500 moved up 0.4%. Based on investor optimism, tax reform may be the key to a continuing bull market.

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Looking back, August brought little change to markets. Beneath seemingly quiescent waters, dramatic and momentous events took center stage. First, Charlottesville gripped the nation, a total eclipse captivated every age, and the month gave its farewell with a deluge of rain and misfortune in Texas. During all that, geopolitical tensions intensified as North Korea continued its repugnant behavior. We now head into arguably the worst market month, September.

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Stocks were mixed on Friday as the Dow Jones Industrial Average managed a 0.2% rise, but the Nasdaq Composite and S&P 500 both fell fractionally by 0.1%. Everyday can’t be one of growth and, frankly, we don’t think that is healthy for a sustainable market. Looking past daily market movement, second-quarter GDP was in line with the consensus at 2.6%, more than double first-quarter results. This data presents a solid rebound but remains short of President Trump’s target of 3 to 4%. Year-to-date, things are still looking good and stocks remain stronger relative to bonds.

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