Stocks continued to rise in the second quarter of 2017, defying expectations that the 8 year bull market must come to an end. Bonds were less strong but generally positive for the quarter and the first half of the year, even as the Federal Reserve increased interest rates two times in 2017.

U.S. stocks positive for another quarter

  • Large cap U.S. stocks gained more than 3% for the quarter and 9% for the first half of the year
  • Small company stocks slightly lower but were still impressive, up 2% for the quarter and 6% for the year to date
  • Almost 25% of S&P 500 Index performance for the year was driven by just 5 stocks (Facebook, Amazon, Apple, Netflix, and Google/Alphabet). These names had out-sized influence – in that they make up less than 10% of the S&P 500*

*Source: Merrill Lynch, Dimensional Fund Advisors. June 2017.

International stocks outperform U.S.

  • International stocks outpaced their U.S. counterparts- first time outperforming for the year since 2012
  • Developed and emerging market indexes both rose over 6% for the quarter and generated gains of 14% and 18% respectively for the first half of 2017, illustrating the benefits of diversification across overseas markets in 2017

Economic growth trends spread overseas

  • Steady economic growth (GDP of 2.1%) and low unemployment (4.4% as of early July) helped expansion
  • Many areas of Europe and Asia enjoyed higher economic growth thanks to improving job markets, increased manufacturing activity, and continued accommodation from central banks, similar trends to those in the U.S.

Bonds show resilience

  • Major bond sectors up 1% to 2% for the quarter and 2% to 5% year-to-date
  • High yield and municipal bonds on higher end of spectrum, government and short term Treasury’s lower

Additional information for some of the key market and economic indicators that we follow is below.

Market Index Q2 Return 1 Year Return Key Statistics Current 06/30/17 Prior 03/31/17
S&P 500 (with dividends) 3.1% 17.9% 10 Year U.S. Treasury Yield 2.3% 2.4%
Russell 2000 Small Cap 2.5% 24.6% US GDP  Growth (Q1, annualized) 2.1% 2.1%
MSCI EAFE Int’l Markets 6.1% 20.3% U.S. Unemployment Rate 4.4% 4.5%
MSCI Emerging Markets 6.3% 23.8% Annual Inflation (Core CPI) 1.6% 2.4%
Barclays US Govt/Cr Inter. Bnd 0.9% -0.2% Crude Oil ($/BBL) $46 $50
Barclay’s Municipal Bond 1.9% -0.5% Gold ($/oz) $1,242 $1,251
Barclays US Corp High Yield 2.2% 12.7% Euro/Dollar 1.14 1.06

Data in table from Morningstar, Wall Street Journal and Bureau of Economic Analysis as of 06/30/17.