Mid-Year Report 2017
This is our Midyear Report in which we will quickly cover general market conditions, portfolio commentary and our outlook. Your quarterly performance report is attached as well.
Lastly, I want to give you an update on what is going on at First Capital. Check out the video above!
Improving economic conditions and higher earnings helped drive global equity markets higher through the second quarter. International equities continued to take the lead relative to US equities. Within international equities, emerging markets (EM) led the way. EM stocks returned 6.4% in 2Q, bringing YTD returns to 18.6%, driven mostly by outsized returns in EM Asia. In the US, the technology sector led the market higher during the first half of the year although we have seen a recent pullback despite attractive fundamentals. All sector showed positive first half performance with the exception of telecom and energy. The disappointing performance by the energy sector reflected the glut of over supply resulting in lower prices.
As we mentioned in last quarter’s commentary, enthusiasm for simulative US fiscal policies continues to wane. Prospects for enacting tax reform legislation in 2017 appears more remote. However, the administration succeeded in deregulating certain aspects of the financial industry. These changes will likely be positive for the sector. The economy’s resilience provides the Federal Reserve Board with the opportunity to reduce its balance sheet and proceed with raising short-term interest rates. Likewise, the European Central Bank appears to be on a less simulative path.
We believe the changes in global central bank policies will lead to less investor complacency and the potential for increased volatility. As a result, we will remain particularly diligent to the potential impact these changes may have on all our investment allocations. For some time, we have reduced our exposures to interest rate sensitive investments that could be negatively impacted by higher interest rates. One of the reasons for potentially higher international interest rates reflects the more positive global economic outlook. During the first half of the year, international developed equity markets returned over 14% and EM equity markets over 18%. This compares favorably to the first half performance of the US S&P 500 of just over 9% and the US Russell 2000 small cap index of just under 5%.
I look forward to speaking with you!
James D. Hiles
Managing Partner, First Capital Advisors Group
For more information, please take a few minutes to view our video.
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