• Equity and bond marketing move higher
• With five weeks remaining, 2017 equity returns very strong
• Fundamentals continue to be mostly positive
• Potential yield curve inversion cause for concern

In a holiday shortened trading week both domestic equity and fixed income markets powered higher once again. The S&P 500, NASDAQ, and Dow were all up meaningfully for the week. Bonds moved marginally higher as yields declined slightly for the week. As we approach the end of November it appears the NASDAQ is headed towards a 30% annual return; the S&P 500 and the Dow are nearing 20% annualized returns. The broad domestic bond market is on track to return between 3%-4% this year. High Yield bonds domestically have returned around 7% year to date even with the recent sell off.

One of the major factors driving the strong performance of the NASDAQ relative to the other two major domestic equity indices is the phenomenal performance of technology stocks this year. The Technology sector has far outpaced the other eleven S&P 500 sectors returning over 38% year to date. The robust performance in Health Care (up 18%+) has also helped.

Fundamentally, positives continue to outweigh negatives domestically. The major market negatives currently continue to be sub normal economic growth (though recent reports show improvement), no meaningful signs of inflation, and a narrowing spread between the 2-year and 10-year Treasury bonds. The latter is currently getting increasing press. Historically an inversion of the yield curve (short term rates being higher than long term rates) has portended recession (sometimes). Currently, the prospects of continual raises in the fed funds rate has put upward pressure on short term rates, and low long rates globally are a major headwind to long rates rising meaningfully here in the States. A pick-up in economic growth and inflation expectations would relieve downward pressure on the 10-year Treasury. As of now, the gradual upward pressure in short rates looks to continue as the probability is high that the Federal Reserve hikes the Fed Funds rate in December.                                                                                                            

Next week on the economic calendar October: New Home Sales numbers are released on Monday; Wednesday the second estimate of Q3 GDP is released by the Bureau of Labor Statistics. Thursday, Initial Jobless Claims for the previous week are published.

Next week earnings reports are once again dominated by Retailers and Technology outfits.

Monday – Tech Data

Tuesday – AutoDesk

Wednesday – Tiffany and PVH

Thursday – Reynolds American, Barnes & Noble, Kroger, Ulta Beauty, and VMware

Friday – Big Lots and Genesco

Indices for the week and YTD are as follows:

S & P 500 down .91% for the week; YTD index return is 16.24%

NASDAQ Composite up 1.57% for the week; YTD index return is 27.98%

Dow Jones Industrial Average down .86% for the week; YTD index return is 19.20%

Benchmark 10-year Treasury bond yield stands at 2.34% - virtually flat for the week

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Chris McGee heads Caldwell’s investment committee, which draws on a team of experienced in-house professionals and carefully chosen outside analysts to make decisions for client portfolios.

A Chartered Financial Analyst (CFA) and Chartered Alternative Investment Analyst(CAIA), McGee had previously been senior investment adviser and senior vice president at PNC Wealth Management in Sarasota for nearly a decade. Prior to that he was portfolio manager for five years with U.S. Trust (formerly Bank of America) in Sarasota. Before relocating here, he had served as vice president, capital management, for Wachovia Bank in Winston-Salem, North Carolina.

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About Caldwell Trust Company

Caldwell Trust Company is an independent trust company with offices in Venice and Sarasota, Florida. Established in 1993, the firm currently has nearly $1 billion dollars in assets under management for clients throughout the United States. The company offers a full range of fiduciary services to individuals including services as trustee, custodian, investment adviser, financial manager and personal representative. Additionally, Caldwell manages 401(k) and 403(b) qualified retirement plans for employers.