The U.S. stock market has more than tripled in value during the runup that started in March 2009, and the most recent quarter somehow managed to accelerate the upward trend. We have just experienced the third-best first half, in terms of U.S. market returns, of the 2000s. Yet, international markets have been performing even more strongly in 2017 and over the last year.
By any measure, this represents a strong first half of the year, driven by the S&P 500 tech sector, biotech firms and information technology companies generally.
Meanwhile, the energy sector, which was a big winner last year, has dragged down returns in 2017. This proves once again the value of diversification; just when you start to question the value of holding a certain investment, or wonder why the entire portfolio isn’t crowded into one that is outperforming, the tide turns and the rabbit becomes the hare and the hare becomes the rabbit. If only this were predictable.
There are many uncertainties to watch in the days ahead. The U.S. Congress is still debating a health care package, and has promised to revise our corporate and individual tax codes later this year. There’s an infrastructure package somewhere on the horizon, and perhaps a round or two of tariffs on imported goods. Inflation often follows when the Fed raises rates, but we don’t know if or when the Fed will do that, or by how much.
Meanwhile, the current the bull market is aging, and the runup has lasted for longer than just about anybody would have expected when we came out of the gloomy period after the 2008 crisis. Inevitably, we are moving ever closer to a period when stock prices will go down. Yet, that day cannot be predicted in advance and basic principles of diversification and discipline will be required.
Wilshire index data: http://www.wilshire.com/Indexes/calculator/
Russell index data: http://www.ftse.com/products/indices/russell-us
S&P index data: http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l--
Nasdaq index data:
International indices: https://www.msci.com/end-of-day-data-search
Commodities index data: http://us.spindices.com/index-family/commodities/sp-gsci
Treasury market rates: http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/