U.S. Versus International
The S&P 500, an index of large U.S. companies, posted a total return of 6.1% for the 13-weeks ending March 31, 2017. U.S. stocks lagged behind International for the quarter as measured by the All Country World Index ex-U.S. stocks, a representation of international stocks outside the U.S. Total return for the 13 weeks ending March 31, 2017 was 6.8%.
Emerging market stocks shone in the first quarter, rising over 11% in U.S. dollar terms. Standouts include Hong Kong, Pacific ex-Japan and Latin America. Investors took advantage of relatively lower valuations in emerging market stocks versus U.S. Additionally, the earnings environment in emerging market countries is showing signs of stability and turning positive in areas like India and Brazil.
U.S. and Japanese stocks took a breather following strong relative price gains in the fourth quarter. U.S. stocks were likely taking a relative pause following their strong performance on the heels of the presidential election. Industrial activity in Europe has improved as the area continues to work its way out of the downturn.
U.S. Sectors
Top performing U.S. sectors for 13 weeks ending March 31, 2017 by total return included Technology (+12.5%), Healthcare (+8.6%) and Consumer Cyclicals (+8.1%). Laggards for the 13-weeks included Energy (-6.5%), Real Estate (1.9%) and Financial Services (2.7%). Earnings and revenue growth in technology stocks were rewarded in the first quarter.
Energy stocks suffered due to a drop in oil prices. Measures indicated that global oil supplies remained relatively high despite efforts by OPEC members to lower production. Energy stocks were poised for a rest, following an advance of 28% in 2016 and 7% in the fourth quarter.
The “Trump rally” that helped propel financial and energy stock prices higher in the fourth quarter reversed course in the beginning of 2017 as the typical slow pace of government initiatives was realized. Earnings and revenue growth for the S&P 500 as a whole were strong, with back to back quarters of growth in the third and fourth quarters. Utilities, real estate and financial companies led the way.