Stock Market Main Changes in 2017

Tuesday, June 13, 2017, 6:00 AM | Leave Comment

In the first quarter of 2017, the stock market showed a volatile behavior that is expected to persist in the following months.

An inter-market trend that began recently shows some previous underperformers taking the lead while former leaders show signs of weakness.

So what are the key takeaways for the 2nd quarter of the year based on the main changes in the stock market?

According to a quarterly market update compiled by Fidelity’s Asset Allocation Research Team (AART), this is a good time to look at inflation-resistant investments as a global rally, tech stocks, and lower quality bonds continue to drive gains.

Non-US economies are fast closing the gap while global expansion remains on a firm ground. The market looks more favorable for international equities. Policy risks could potentially advance market volatility further.

In 2017, we do not expect to see a stock market crash. In fact, we should be on the lookout for changing trends instead. Goldman Sachs forecast a neutral stock market for 2017with a fairly bearish bias.

The same forecast is shared by the results of a survey conducted by Reuters on equity specialists, which showed that Reuter’s market outlook in 2017 was, on average, neutral.

However, there have been a few key changes in the first quarter of 2017.

  • One sector that did break out in the 1st quarter of 2017 is the financial sector.

    Financial stocks have outperformed in the last few months. The trend is expected to continue as insurance and banking stocks take advantage of the rising stocks.

    The strength of the financial sector has been in the making for a long time. As the chart below indicates, financials broke out to the S&P 500 broad index:

    Stock Market Main Changes in 2017

    Chart Source:

  • Industrials Still Riding on Trump’s Victory

    Trump’s seemingly clear plans to improve public infrastructure has been a major boost to the industrial sector. It is no surprise then why industrials continue to perform well in recent times. Their current price confirms Industrial’s bullish outlook for this year.

  • Global Expansion Counteracted Political Uncertainty

    The global recovery in industrial and manufacturing activities has in the past few years bolstered a well-synchronized worldwide expansion.

    Despite the post-election uncertainty about anticipated changes in the U.S economic policy, volatility in the country’s stock market remained at a low level.

    Non-US equities, supported by the weaker dollar, led the Q1 stock market rally while emerging market equities had better performance than the US large caps.

    In the midst of this international economic expansion, bond yields helped significantly to give a solid backdrop for a wide range of asset categories.

As inflation indicators become stable, policy makers become less accommodative, and the country’s business cycle matures, there’ll be no reason for smaller allocation tilts.

There is still some uncertainty for the US economic legislation as we enter the next half of 2017. The upcoming election in top European nations, such as the recent French presidential elections, could potentially boost stock market volatility.

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