S&P 500 up 2.3% in Second Quarter and 9.2% in 2017

Greetings Friends,

The second quarter of 2017 is history. That means it’s time for me to drop in for an update to let all my clients and friends know what is happening in the market – and what to expect in the third quarter and rest of the year.

It was another solid quarter for US and global stocks.

  • The S&P 500 gained 2.83%.
  • The tech heavy NASDAQ was up 4.19%.
  • The global stock market gained 4.00%.
  • Emerging markets gained 4.82%.

Take a look at the respective returns in the chart below.

 

 

 

 

 

 

 

 

 

Those gains added to what is shaping up to be a pretty solid year for stocks. In fact, the S&P 500 logged its best first half since 2013. Take a look at the returns and chart below.

  • The S&P 500 is up 9.17%.
  • The NASDAQ is up 16.73%.
  • The global stock market is up 11.90%.
  • Emerging Markets are up 18.77%.

As you can see, international stocks are having a great year.

I highly recommend my wealth management clients own international stocks as well as US stocks. The US accounts for only about 25% of the global economy. Owning international stocks is a critical strategy to stay diversified – and it can also boost your returns in years that the S&P 500 lags.

Here are two great International funds many of my clients own. One is for developed economies, the other is for emerging economies.

  • Vanguard Total World Stock (NYSE: VT)
  • iShares MSCI Emerging Markets (NYSE: EEM)

We’re also seeing some pretty great returns in our individual stocks.

Here is a list of the most commonly held stocks among my clients looking for growth.

These are the most innovative companies in the world, and they have been delivering great returns in 2017.

Tesla (TSLA) is leading the pack, up 69% on the year.

Facebook (FB) is up 31% this year.

Netflix (NFLX) is up 21%.

Apple (AAPL) is up 25%.

Amazon (AMZN) is up 29%

Google (GOOG) is up 17%.

What Should we Expect in the Third Quarter and Rest of 2017?

As always, there are plenty of things for investors and stocks to be nervous about.

Stocks have had a heck of a run in the last nine months. While that has been great for returns, the S&P 500 does look pricey from a historical perspective.

As you can see in the chart below, the S&P 500’s PE ratio (price-to-earnings) ratio of 25.63 is high.

Also – the S&P 500 is moving into what is typically its weakest time of the year.

July, August and September have typically been volatile months for the stock market.

One more thing – it looks like Illinois is already having a full financial meltdown – and according to my research, there are many other states right behind it waiting to have a  financial meltdown of their own.

This is my #1 concern right now.

It reminds me of the financial crisis of 2008.One bank goes down (Lehman Brothers), all banks follow, causing a global financial meltdown because everything is connected.

Today, one state goes down, all states follow, causing a global financial meltdown? I really hope I am totally wrong here but this is something I will be watching closely and posting updates on.

On the flip side, there’s also plenty of reasons to be optimistic about stocks.

The biggest, as I’ve pointed out before, earnings are having a great year. And there is no other factor that is more important to stocks than earnings.

Take a look at the chart below. S&P 500 earnings are set to continue expanding for the rest of the year.

My Big Picture Analysis

I am expecting a bumpy ride in the third quarter. I wouldn’t be surprised to see a 10% pullback. That might not sound like much, but a 10% pullback will cause plenty of pain on the Street.

For long-term investors, don’t even worry about it. Just keep making your monthly contributions and you’ll be fine.

For shorter-term investors or retirees, if the prospect of a 10% pullback makes you nervous then trim your stock holdings and add to your bond holdings.

Remember, stocks are for growth, bonds are for capital preservation.

Other than that – I’m back in the Chicago area living in the northern suburbs right on the lake.

I had a great 6 months in San Diego but I’m happy to be back.

I’ve already seen a lot of my clients and I am working my way down the list – I’m looking forward to seeing everyone.

That’s all I’ve got for now. Everyone have a great 4th of July. I’ll be back in a few weeks with another update.

Your Investment Partner,

Mike

This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.

ABOUT THE AUTHOR

Michael Vodicka

Michael Vodicka is the president and founder of the Vodicka Group Inc., a licensed investment advisor (Series 65) and a financial journalist.