Spring 2017 Market Quarterly

We’re Growing!

John, Sandra, JimOn March 7, 2017 Barron Financial Group hired its first new advisor.. John Seagrave joined our firm from a previous career in the Athletic Marketing department at UCONN.

Sandra and I spent much of 2016 developing and investing in our technologies and business processes to better accommodate this expected expansion. We feel it is time to bring our message to a broader audience. And we believe John can help us do that. John and his fiancé Marissa currently live in Vernon, Connecticut and John expects to be building his business towards the Hartford area. Please join me in wishing John the best of luck in expanding and refining his craft  of financial advising and building a robust base of clients.

As I write this newsletter, the temperature outside is climbing towards 80 degrees. I’m sure that temperature won’t last here in Connecticut in early April, but it’s a sure sign spring is here. I’m looking forward to getting outside to start the spring clean-up chores. I hope you all get a chance to get outside and enjoy the improving weather.

Last Quarter Round Up

The alleged “Trump Rally” continued in the first quarter of 2017. The S&P 500 index was up +6.07 for the quarter. In a notable shift from the past, the International EAFE index finished the quarter up +7.25 and Emerging Market index was up an impressive +11.44. Both foreign indices beat the U.S. market, which has been rare over the last 6 years. The Aggregate Bond index was up +0.82.

All the global stock markets started the year strong, only the S&P 500 went flat just past mid-quarter. My sense is that the utter collapse of the GOP healthcare bill played a role in that flattening. Many view the failure of President Trump’s first legislative initiative as a likely derailment of his overall agenda, not least of which is tax reform. The markets may have that same view. International and Emerging markets most likely enjoyed their positive performance based on the long-awaited appearance of indicators of economic recovery. Economic activity, along with projected Gross Domestic Product (GDP), was up in much of the world economy. Some investors were surprised to see the bond market finish the quarter up, given the Federal Reserve (FED) rate increases in both December 2016 and March 2017. I continue to believe this is a positive move toward more standard monetary policy, and a sign we are moving past the damage caused by the 2008 global financial crisis. It is also an indicator that if interest rates rise in a controlled fashion, the bond market may not implode as so many fear.

Current Quarter Outlook

Last quarter I suggested the “Trump Rally” could run into some challenges due to sentiment shift and legislative reality. That proved salient with the collapse of the Obamacare repeal and replace bill. As I mentioned above, this “legislative reality” and the realization that the new U.S. leader didn’t have all the answers, sent global stocks surging while the U.S. market went flat. This might suggest that the U.S. trend of economic and market dominance may be coming to an end. But unlike the mainstream media, I don’t believe the demise of the healthcare bill portends the derailment of the Trump agenda. In my view, the healthcare bill died an unexpected death in the House of Representatives, but I suspect it would have died in the Senate anyway. And with that, focus can now shift to something that most Americans, and Legislators, want…tax reform. Tax reform won’t be easy, but there appears to be a clearer path to pursue this than there ever was for healthcare reform. And, importantly, if the U.S. does implement some version of tax reform, it could improve corporate earnings, consumer sentiment and business investment. All of which would be positive for U.S. stocks. Thus, while the trend of U.S. dominance might appear to be closing, it’s too early to call it over.

I remain comfortable that we won’t see a recession in the U.S. in 2017. I expect slow to moderate growth to continue. My equity strategy is to remain fully  invested, a slight overweight on the U.S., still underweight International and a slight underweight to Emerging Markets. In fixed income, I remain invested with greater exposure to credit paying higher yields. I am neutral on Alternative investments.

Barron Financial Group, LLP is a fee-only Registered Investment Advisor regulated by the Connecticut Department of Banking.

This newsletter is for general information only and should not be considered investment advice.  Investors should consult with a trained investment professional to discuss their particular situation.