January 19, 2017

Fourth Quarter Highlights

Financial Markets

  • The shift in equity markets away from high dividend payers and defensive stocks, to cyclical stocks, accelerated after the U.S. elections due to President-elect Trump’s pro-growth policies, and reaction to positive economic reports, rising oil prices, and higher interest rates. Small-capitalization (cap), financial services, and commodity related stocks had the best returns. Currency moves and talk of trade barriers hurt emerging markets stocks.
  • Global bond yields moved higher and bond prices dropped on expectations for higher inflation and improving economic growth.
  • Oil and industrial metals prices rallied on signs of better economic growth and the oil production cut agreement.

Overview of the Economy

  • Much of the economic data in the U.S. continues to improve. Third quarter gross domestic product (GDP) growth was 3.5%, the highest reading in two years.
  • Manufacturing purchasing managers’ index (PMI) readings are improving around the world with the latest index levels well into expansion territory in the U.S, the eurozone, and China.

Notable Events

  • The Organization of Petroleum Exporting Countries (OPEC) and 11 other countries agreed to limit production by 1.2 billion barrels per day for six months beginning in January.
  • The U.S. Federal Reserve Open Market Committee (Fed) raised its federal funds rate by 0.25%. The European Central Bank (ECB) extended its monthly asset purchase program for nine months but reduced the amount of assets to be purchased each month.

For an in depth analysis of the quarter, please download the PDF.