Published by Taylor Financial Group
LPL Financial’s recent Outlook 2017 Executive Summary reminded us that, this time last year, things were much different in the stock markets and in the World. We were still recovering from the August 2015 market collapse, and headed toward what would prove to be a rough January and February 2016.
The market continued to be rather volatile throughout the year with continuous concerns about China, Brexit, the soaring U.S. dollar, tightening financial environments, declining earnings, and that lingering potential interest rate hike that everyone was dreading and fearing. But then there was the unexpected Presidential Election outcome that rocked the market – in a good way (at least so far)! This year was unpredictable, to say the least.
Now, as we approach 2017, we feel that there are new opportunities, as well as new risks, in the markets. As US News put it, the outlook for stocks is positive, but which sectors of the market do better or worse partially depends on what policies the President-elect Donald Trump implements. Let’s review the Outlook for 2017 in a few key areas.
According to projections from PNC Financial Services Group, the US economy will experience 2.3 percent growth in 2017, and that is better than the 1.5 percent growth we had in 2016. Should this projection turn out to be accurate, stock prices will likely rise. However, while stock markets soared after Trump’s win, uncertainty about his long term impact may prove to be unnerving for investors.
Some other areas of the economy will experience significant change. Oil prices seem certain to increase to at least $50 a barrel, $5 more than the current price (some believe the increase could be even greater). But, on the bright side, homebuilding will produce a more positive change, with expectations that homebuilders will start building again now that wages are rising and unemployment is lower.
Most politicos believe that Trump has no plans to keep Obamacare, or at least not in its current form. Congress seems to be siding with Trump on this item, so we should expect change. Moreover, recent tweets from the President Elect show that Trump wants to curb drug costs, and this has created volatility in the sector.
Around the World
Global prosperity in 2017 will keep increasing, according to Fortune’s predictions, but nationalism, political uncertainty, and stunted trade may create new headaches. Though fundamentals overseas have been improving, we remain watchful over international investments due to global geopolitical risks.
According to FactSet consensus estimates, both developed and emerging markets have seen their corporate earnings pictures improve in 2016, with emerging market earnings expected to grow by 15% in 2017. The election of Trump welcomes increased skepticism regarding the benefits of global trade. Like Brexit, Trump’s election demonstrates the spirit of the anti-globalization movement taking place worldwide.
One of the greatest risks to any international investment is currency uncertainty. Pursuant to LPL Financial’s 2017 Outlook, despite improved fundamentals and attractive valuations, especially in emerging markets, we should wait for further evidence of dollar stability before adding to positions. Should the dollar stabilize, emerging markets may provide a particularly attractive, albeit a higher risk opportunity. In any case, the primary risks to international investing are a stronger dollar and changes to the global trading system.
Having a Plan!
Regardless of any predictions, as we move closer to the start of the New Year, we continue to emphasize to our clients the importance of remaining focused on your personal goals and having a plan. In 2017, it is our goal to get every single one of our clients set up with a financial plan using our personalized planning process, WealthMatch. If you haven’t already met with us to discuss WealthMatch and how it can help you plan for your future, please give us a call. Start the New Year with a plan!
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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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