December capped off what was a strong year for stocks with the S&P 500 logging its 14th consecutive month of gains. Once again, the S&P 500, Dow Jones Industrial Average, NASDAQ, Russell 1000, Russell 2000, and Russell 3000 each hit all-time highs during the month. The S&P 500 increased 1.1% for the month. Small cap stocks, as measured by the Russell 2000, decreased by 0.41%. Value stocks, up 1.3%, outperformed growth stocks’ return of 0.7. International stocks outperformed domestic stocks during December, with developed international stocks, as measured by the MSCI ACWI ex US Index, increasing 2.1% and emerging market stocks increasing by 3.5% for the month. For the full year, the S&P 500 returned 21.8%, with growth stocks (+29.6%) easily outperforming value stocks (+13.2%). The MSCI ACWI ex US Index increased 25.7% and emerging market stocks generated a 37.5% return during 2017.
Bonds posted gains for the month of December. The yield curve flattened as interest rates increased for bonds maturing in less than 10 years and decreased for bonds maturing later than 10 years. The yield on the benchmark 10-year Treasury decreased two basis points to 2.40% during the month. As expected, the Federal Open Market Committee (FOMC) raised the fed funds target rate to a 1.25 to 1.50% range at the conclusion of its last scheduled meeting of the year. The yield curve flattened significantly over the course of the year. Yields for Treasuries maturing from one month to one year increased between 84 to 91 basis points. Yields for Treasuries maturing from 10 years to 30 years decreased between 5 to 32 basis points. The Bloomberg Barclays Aggregate Bond Index increased by 0.46% for the month as Treasuries and investment grade corporates increased by 0.31% and 0.91%, respectively. High yield bonds increased 0.30%, and municipals increased by 1.05%. For the full year, the Bloomberg Barclays Aggregate Bond Index increased by 3.54%. Treasuries increased by 2.31% and investment grade corporates added 6.42%. Credit was rewarded again this year with high yield bonds advancing 7.5%. Municipals increased by 5.45%.
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December marked the 14th consecutive month of gains for the S&P 500. The major U.S. stock indices, including the S&P 500, Dow Jones Industrial Average, NASDAQ, Russell 1000, Russell 2000, and Russell 3000 again hit record highs during the month. Returns for the full month of December were mixed as large cap stocks posted gains and small cap stocks posted losses. Value stocks outperformed growth stocks for the month. International stocks, both developed and emerging, outpaced domestic stocks during December. For the full year, growth stocks handily outperformed value stocks and large cap stocks beat small cap stocks. For the first time since 2009, International stocks outperformed U.S. stocks for the full year.
FIXED INCOME MARKETS
The yield curve continued to flatten as yields increased for bonds maturing in less than 10 years and decreased for bonds maturing in 10 to 30 years. The yield on the 10-year Treasury decreased two basis points in December to 2.40%. The Bloomberg Barclays Aggregate Bond Index increased in value for the month as Treasuries and Investment Grade Corporates had positive returns. High Yield and Municipals both posted gains for the month. The yield curve flattened dramatically over the course of the year. The yield on the one month Treasury bill increased 84 basis points while the yield on the 30 year Treasury bond decreased 32 basis points.
The economy continued to grow in November. The labor market experienced its second consecutive month of job growth in excess of the 200 thousand level and unemployment remained subdued at 4.1%. Both the ISM Manufacturing Index and ISM Non-Manufacturing Index continue to show economic grow. The third estimate of 3rd quarter Real Gross Domestic Product was revised to 3.2%. The housing market continued to show strength, as both existing and new home sales hit new post-recession highs. As expected, the Federal Open Market Committee (“FOMC”) raised the fed funds target rate to a range of 1.25% to 1.50% at the conclusion of its last scheduled meeting of the year. The Senate Banking Committee voted to recommend Jerome Powell as the next Chairman of the Federal Reserve. Powell’s nomination is now subject to a full Senate vote. President Trump signed the GOP backed Tax Cut and Reform Bill into law after being passed by both houses of the congress.
|Retail Sales ex Auto & Gas||Nov||0.40%||0.80%||0.30%||0.40%|
|PPI MOM ex Food & Energy||Nov||0.20%||0.30%||0.40%|
|PPI YOY ex Food & Energy||Nov||2.40%||2.40%||2.40%|
|CPI MOM ex Food & Energy||Nov||0.20%||0.10%||0.20%|
|CPI YOY ex Food & Energy||Nov||1.80%||1.70%||1.80%|
|New Home Sales||Nov||655,000||733,000||685,000||624,000|
|Existing Home Sales||Nov||5,530,000||5,810,000||5,480,000||5,500,000|
|Durable Goods Orders||Nov (P)||2.00%||1.30%||-0.80%||-0.40%|
|S&P CoreLogic CS 20-City YOY||Oct||6.25%||6.38%||6.19%||6.16%|
|GDP Annualized QOQ||3Q (T)||3.30%||3.20%||3.30%|
|Univ. of Mich. Sentiment||Dec (F)||97.2||95.9||96.8|
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