This past quarter was one of those periods when it seemed the domestic markets could not make a decision to which way to go – lots of volatility, yet ended up basically flat for the quarter as measured by the S&P 500 index.
Though the European markets were negative last year, they gained over 5% the first quarter this year. The Eurozone received a little lift from deflation, causing consumers to spend more. Emerging markets were basically flat, but the core bond market measured by the Barclays Aggregate index was slightly positive.
The rising dollar caused some headwinds resulting in some slowing of exports. This will slow the GDP some, but not significantly. The economic effect of lower exports was offset somewhat by increased consumer spending due to lower gas prices. Employment is looking very good with a stronger pace of hiring. Housing is doing well and is expected to continue.
Most economists expect the GDP to be around 2.7% for 2015.
What Should We Expect For 2015?
The domestic stock market is currently slightly overvalued. Our managers are generally underweighting domestic stocks in favor of European stocks which are currently undervalued and thus have a stronger return potential over the next five years.
It is expected the Fed will begin some tightening of interest rates by September or possibly earlier. This has long been anticipated and we don’t expect the stock markets to overreact. However it is definitely a time for great care in managing domestic and world bond allocations appropriately.
Should We Do Anything Differently?
Since each of our clients are already in the best position for what is expected in the future, we see no changes being recommended for most of you.
As always, we very much appreciate the opportunity to work with you. Please do not hesitate to call with any specific questions you may have. We look forward to seeing you soon.
Max W. Smith, CFP®, CIMA®
Kent G. Forsey, CFP®
12213 W Bell Road, Suite 209
Surprise, AZ 85378