February 2017 Market Update


The Trump Bump became just a slight ridge in January. The S&P 500 was up 1.79%, which is pretty good, but the other indices we follow (DJIA, NASDAQ and Russell 2000) were all positive by a half a percent or less. That’s a pretty dramatic slowdown from the torrid pace the markets set in November and December. Maybe the reality that President Trump can’t get everything he wants as soon as he wants it is starting to set in. As mentioned last month, there’s a lot of entrenched power in Washington, and they won’t give any up without a tremendous fight. At ProVest, we continue to look at the markets with lots of caution. I attended a meeting in Austin, TX with a large investment management firm in January. To a person, they were very positive about the prospects for the stock market this year. When I asked them about some of the measurements I pay special attention to, they replied that they do not consider them in formulating their outlook. I do know that most market analysts are normally more optimistic than what the stock market turns out to be. For example, in 2008 the consensus of the analysts forecasts was that the S&P 500 would gain 11.1%. The market lost 37% that year. In fact, there has not been a year this century that the analysts have predicted anything but a gain. So instead of falling victim to a prediction, we buy lots of research and look at what the actual numbers are telling us. And at the time of this writing, all our indicators are still positive because the market still has some momentum. But the cost of buying a dollar’s worth of earnings continues to increase, and is higher now than it was in October, 2007, at the start of the great market crash that ended with the market shedding 56% of its value over 17 months. So forgive us if we’re not as optimistic as the analysts. However, remember that the time will come that we will be saying that the market is cheap and poised for a big rally, and most people won’t believe us then, either, because of all the negative financial news coming out of New York and Washington. But we will still be buying our own research that comes to us every day without the filter of politics or Wall Street. We know we must continually earn your trust and confidence, and that’s just what we aim to do.