1330 Orange Ave., Ste 302
Coronado, CA 92118
p: 619-319-0520
f: 855-691-0427
Read financial tips and market updates in our weekly newsletter
Copyright © 2002 – 2023 Orion Capital Management LLC • Coronado, CA
Disclosure: Orion Capital Management LLC (“Orion”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC). The firm offers advisory services in the State of California and in other jurisdictions where registered or exempted. Registration does not imply a certain level of skill or training. The information on Orion’s website or in its distributed commentary shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons or entities of another jurisdiction unless otherwise permitted by statute. Orion’s individualized responses to consumers in a particular state in the rendering of personalized investment advice for compensation shall not be made without the firm first complying with jurisdiction requirements or pursuant to an applicable state exemption.
The information on Orion’s website or in its distributed commentary is not investment, tax, accounting or legal advice. Orion is not a tax advisor. For tax advice individuals should consult their CPA. This information is also not an offer or a solicitation of an offer to buy or sell any security, or to be construed as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon in the making of investment decisions. All content on this site is for informational purposes only, and nothing herein should be construed as an investment recommendation. Opinions expressed herein are solely those of Orion, unless otherwise specifically cited. Material presented is believed to be from reliable sources, but no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas described on Orion’s website or in its distributed commentary should be discussed in detail with an investor’s personal financial advisors and legal counsel prior to implementation.
Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested.
The information on Orion’s website or in its distributed commentary is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, Orion Capital Management LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.
Testimonials or reviews on Orion’s website are from current clients. Orion does not compensate for reviews or testimonials and has no material conflicts with clients offering reviews.
Orion does not warrant that the information on Orion’s website or in its distributed commentary will be free from error. Your use of this information is at your sole risk. Under no circumstances shall Orion be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the information provided on this site, even if Orion or an Orion authorized representative has been advised of the possibility of such damages. Information contained on this site should not be considered a solicitation to buy or an offer to sell any security, or a recommendation to buy or sell any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
Schedule a quick introductory call with you and see if we would be a good fit for you.
Mid-Quarter Update: Still Waiting. . .
Both Stocks and Bonds Resilient
Since the end of the first quarter on March 31, U.S. stocks have made good progress. The S&P 500 Index is 1.6% higher than on that date and is trading just a whisker off of its all-time highs as I write this. Since that time, first quarter corporate earnings have (mostly) been reported and investors largely liked the numbers. The sectors leading the markets have changed in recent months, however. While it was the financial and industrial sectors that performed the best in the immediate aftermath of the election, technology has come back to become the driving force in the markets after sitting out the rally in late 2016.
Bonds, which lost ground after the election as investors positioned for a higher-growth, higher-inflation environment, have been making back some of that ground so far in the second quarter. The ten-year U.S. Treasury note yield has fallen from 2.39% on March 31 to 2.27% today. (As yields fall, bond prices appreciate.) While 12 basis points is not a huge move, it does signal that investors are becoming somewhat more circumspect about the prospect of accelerating economic growth as we enter the back half of 2017. In that sense these yields are something of a barometer of the progress of the new administration. As investors foresee delays or major changes to the administration’s stated agenda, they are more likely to be adding to their bond positions, pushing prices higher. The mostly stable yields on longer-term Treasury debt despite the two recent Fed rate hikes show that investors are not yet convinced that the economy can rev up to the administration’s 3% growth target anytime soon.
Economic Growth Anemic
While both the equity and fixed income markets have done fine so far in 2017, the economy overall is dragging. First quarter economic growth in the U.S. was a mere 0.7%, the weakest pace of growth in three years. Consumer spending just barely grew and corporations invested less on replenishing their inventories. This 0.7% performance came on the heels of 2.1% growth in the fourth quarter of 2016.
Two Strong Countervailing Forces
Today investors are still in wait-and-see mode as they closely watch two main issues—one of which seems to be holding stocks back and one that seems to be trying to propel them higher. The issue that seems to be impeding stocks is the progress of the Trump administration on its legislative agenda. The focus in Congress seems to have shifted in recent weeks from legislative matters such as health care and tax reform to the ongoing investigation into the alleged ties between members of the Trump campaign and Russia. To the extent that this investigation bogs down the administration as we go into the summer, investors will come to see major changes on the tax reform front as less likely to occur in 2017. If the administration were to formally push out its timeline for passage and implementation of its proposed reforms, many investors will be likely be disappointed.
On the bright side, U.S. companies continue to do quite well on the profit front. Outside of the consumer sector, they (mostly) reported strong earnings growth in the first quarter, despite the meager gross domestic product (GDP) growth in the quarter. Because many companies have become more efficient and repurchased many of their own shares over recent years, they are not dependent on a strong economy to boost their earnings. It is not intuitive, but investors should remember that stocks do not require a backdrop of rapid economic growth to deliver attractive investment returns.
Please do not hesitate to contact me if there is anything about the markets or your portfolio that you would like to discuss.
Share This!
Join Our list!
Join our email newsletter list to receive more market updates and financial articles like this one.
The Fed and Jackson Hole
Fed to Present Update at Jackson Hole on Friday In the year since Federal Reserve Chairman Jerome Powell’s last speech
Soft Landing Back in Play
Soft Landing Hopes Rising A “soft landing,” a scenario in which the Federal Reserve tames inflation through interest rate hikes
Markets Calm Amid Crosscurrents
Both stock and bond markets seem to be taking today’s many conflicting financial and political cross currents in stride, with
Peter Thoms, CFA, MBA