4Q2017 REVIEW: US ETF

Author: David R. Kotok, Post Date: December 14, 2017
image_pdfimage_print

The last quarter of 2017 revealed continued bullish momentum in the US stock market and ongoing increases in earnings of US public companies. Through the middle of December, the market made progressive new index highs. Rotation among sectors finally took some steam from the “FAANMG” stocks.

Notwithstanding the high price levels, we expect stocks to rise into next year. Earnings momentum is a powerful force. Tax policy changes portend well for US companies.

We end the year with an overweight of smaller-cap stocks. Note that in the first eleven months of 2017, the Russell 2000 Index achieved about half the return of the NASDAQ 100 (about 14% versus about 30%). We think that relative performance will reverse into yearend and early next year.

We have rotated down in our overweight of tech stocks. We have Energy positions focused on US domestic oil and gas. We like the Health sector. Our US ETF accounts are fully invested.

Over time various broad market measures tend to converge. This year’s divergence has been huge; we expect reversal. That anticipated convergence supports our small-cap overweight theme. For the last 10 years the annualized results range from Russell 3000 (lowest, at 8.5%) to NASDAQ 100 (highest, at 13%). Note that the FAANMG stocks’ recent extraordinary outperformance is responsible for this gap. Without FAANMG, the market averaged about 9% annualized for the decade. Remember that the decade includes the 2008–09 bear market period.

We do not think the bull market is over. In 2018, we expect more volatility within an upward trend.

cumber map
Cumberland Advisors® is registered with the SEC under the Investment Advisers Act of 1940. All information contained herein is for informational purposes only and does not constitute a solicitation or offer to sell securities or investment advisory services. Such an offer can only be made in the states where Cumberland Advisors is either registered or is a Notice Filer or where an exemption from such registration or filing is available. New accounts will not be accepted unless and until all local regulations have been satisfied. This presentation does not purport to be a complete description of our performance or investment services. Please feel free to forward our commentaries (with proper attribution) to others who may be interested. It is not our intention to state or imply in any manner that past results and profitability is an indication of future performance. All material presented is compiled from sources believed to be reliable. However, accuracy cannot be guaranteed.
Loading...