July 2017 Market Commentary

This month we’re writing from beautiful Santa Fe, New Mexico, where it’s a nice weather break from the warm (ok, some would say HOT) Texas summer.  It is nice to get away from the office and get a new perspective on things, so here it goes…

Earnings season in the stock market is upon us again, and so far, reactions have been muted though somewhat positive. We’ve again touched new highs on the S&P 500.  But while that sounds great, we’re only a few percentage points higher than the record high set on March 1st  of this year.  In the past few weeks, we saw a potential shift in leadership from Large Cap Growth to Large Cap Value – only to see it be reversed in less than a week. Technology, to us, still has the most strength, but Healthcare looks like it could be ready to help broaden that strength.  And as we mentioned last month, if the Energy sector can pull itself together, we could see more market highs being achieved more frequently.  From what we’re seeing, that could be starting soon. We will remain optimistic.

The following chart is the cumulative average of stocks going up vs stocks going down on the NYSE.  To us, it continues to show how the majority of stocks on the NYSE seem to be headed in a positive direction.

 

One Year Chart of the NYSE Advance-Decline Cumulative Average (Stockcharts.com)

 

International – Overseas markets haven’t done much of anything in the past few years.  In fact, the iShares MSCI EAFE Index (Ticker: EFA) average return from 7/18/2014 to 7/19/2017 (the past 3 years) has measured just over 2% on average (FastTrack data).  However, in the past 3 months, this index has been stronger than most US markets (excluding the Technology Sector and Large Cap Growth).  We found this so interesting that we’ve started to review it daily against the S&P 500 to see if there is something we need to add to our strategies.

V3 – Our proprietary indicator continues to suggest growth-oriented investing for the 3rd quarter of 2017, as it has been since the first of this year.  To us, this information suggests that a major negative market shift isn’t expected in the near future. However, there are always outliers and black swan events that can move the markets beyond expectation.  So we remain watchful and prepared for such events.

The big picture – Technology and Large Cap Growth (still) remain the leaders this year, which has been where our investment has been focused.  A few other sectors may finally be catching up, which we believe could lead to more upside in the overall market.  But not to be forgotten (unlike the past 3 years) are the International markets.  We’ll continue to keep an eye on them as well as the overall risk we perceive to be out there in the world.

We hope everyone is having a great summer!!

 


1 The Standard and Poor’s 500 is an unmanaged, capitalization weighted benchmark that tracks broad-based changes in the U.S. stock market. This index of 500 common stocks is comprised of 400 industrial, 20 transportation, 40 utility, and 40 financial companies representing major U.S. industry sectors. The index is calculated on a total return basis with dividends reinvested and is not available for direct investment.

2 V3 is a proprietary indicator developed by Shadowridge Asset Management, LLC. Its objective it to take several market sentiment factors and project how to view US stock market investment in the following quarter: for Safety, for Balance, or for Growth.