First Quarter 2017 Update

April 28, 2017

Key Points

• U.S. economy remains stable with few worries on the horizon
• The global outlook is improving, with domestic growth helping the outlook for economies worldwide
• Confidence levels are at their highest levels since 2000, but the market is susceptible to failing to meet expectations
• Equities face the likelihood of increased volatility over the near term

1st Quarter Market Commentary

In recent quarters, the U.S. economy has proven to be a stable, steady grower, and according to most economists, few dark clouds are on the horizon. The economy continues to be supported by improving job growth and, more recently, a surge in consumer, business, and investor confidence. The first three months of the Trump administration have spawned a swell of enthusiasm, despite Congress’ recent setback of failing to move ahead with overhauling health care.

Below, we’ve highlighted broader market returns for the 1st quarter and year-to-date time periods:

Source: Thomson Reuters, Envestnet

Investment Outlook & Strategy

The global economic landscape is improving. Although the dollar’s appreciation has suppressed U.S. growth, it has helped prospects for foreign economies exporting to the U.S., particularly Europe, Japan, and China. In addition, improving domestic growth will certainly help the outlook for economies worldwide, as U.S. consumers demand more goods and services. The Eurozone’s recovery is picking up steam, albeit modestly, as a result of rising export growth and the housing market’s steady recovery. Although China is expected to see further easing in GDP growth, as the country continues its transition to a more consumer-oriented economy, analysts nevertheless expect its economy to grow at close to 6% in 2017. Additionally, domestic demand in China is increasing as a result of a significant rise in consumer credit.

Summary

Whatever one’s political leanings and views on President Trump and his administration are, there is little doubt that his election has generated a great deal of optimism about the future of the U.S. economy. The stock market rally (dubbed the “Trump Rally”) that has occurred since Election Day has been driven, at least in part, by expectations for accelerated economic growth and improving employment.

General optimism is reflected in the most recent consumer, business, and investor confidence surveys, which in some cases show the highest levels of confidence since 2000. But, we are quick to note that failing to meet these expectations can have serious consequences for markets in the near term. Investors will be watching carefully as Congress moves to tackle tax reform and other elements of President Trump’s economic agenda. If the outcome appears as though it will disappoint, stocks could face headwinds, due to extended valuations relative to historical norms.

Reasons exist to be optimistic about the economic outlook going forward, but the ride may not be smooth, and stock prices will likely face bouts of volatility that investors haven’t experienced during this bull market.

Information provided is for informational purposes only and should not be construed as investment advice. The views expressed are current only as of the publication date, are based on information that St. Clair Advisors believes to be accurate, and subject to change without notice. All investment decisions must be evaluated as to whether they are consistent with your investment objectives, risk tolerance and financial situation. St. Clair disclaims any liability for any direct or incidental loss incurred by applying any of the information in this publication. Indexes are unmanaged and one cannot invest directly in an index. Past performance is no guarantee of future results.

St. Clair Advisors
6120 Parkland Blvd. Suite 306
Mayfield Heights, OH  44124
TEL: 216.925.5670 | FAX: 440.646.1838
www.saintclairllc.com