4Q2017 REVIEW: US ETF
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.
Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.
Sign up for our FREE Cumberland Market Commentaries
Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.