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2017 YEAR END REPORT

January 22, 2018
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2017 YEAR END REPORT

by Justin Sautter

Happy New Year!

Wow!  What a year we have had in the markets.  We can only hope that 2018 finishes just as strong.  I suspect that politics, interest rates and international relations will again be the deciders of that unknown.

At the conclusion of last year, I mentioned that many pundits felt the post-election rally had likely stolen from potential 2017 gains.  I postulated that the new administration’s policies relating to the business climate here in the US would likely resolve that question.  It appears that this has largely been the case as gains in the US markets were substantial, largely driven by expectations for deregulation (much deregulation occurred) and a revamp of the tax code (signed into law at the end of the year).  Both issues cleared the way for the markets to support higher prices based on expectations of rising company earnings.

One thing that surprised many people, myself included, was the strength in foreign markets, especially the Emerging Markets (EM) this year.  Coming off 2016 where EM saw an 11.6% gain, they put in a whopping 37.8% gain in 2017 (Developed International saw gains of 25.6%).  I emphasize this not only because it is impressive, but because it underscores the need to have a well-diversified portfolio, not only across domestic sectors, but also across borders and asset classes.

An important factor to watch as we journey through 2018 will be the Federal Reserve.  Assuming her successor is confirmed, Janet Yellen will leave the Fed sometime this year.  Policies could then change, but for now most folks are assuming 3-4 rate hikes.  If that remains the case then markets should remain calm.

As always, I will be diligently watching the stock and bond markets and looking for opportunities.  Please don’t hesitate to call anytime.

Best Regards,

Justin Sautter 

2017 Returns for Key Asset Classes and a Diversified Portfolio:

Fixed Income3.5%
Cash0.8%
High Yield Bonds10.4%
REITS8.7%
International Equity 25.6%
US Large Cap21.8%
US Small Cap14.6%
Emerging Equity37.8%
Conmmodity1.7%
Diversifited (Defined as 60% Equity, 35% Bond, 5%Commodity)14.6%

Source: JP Morgan GTM 1Q2017