Market Performance Overview – Not Much Change Since Q1 2017

  • Domestic equities performed well, but were again outpaced by foreign equity returns.
  • Domestic bonds were positive, but continue to face headwinds due to current and potential future rate increases.
  • Foreign equities continued to produce strong returns due to a strengthening global economy.
  • Foreign bonds produced positive returns and once again, outpaced domestic bond performance.

What Have We Learned So Far?

2017 has provided a reality check for policy hopes in the U.S. and political fears in Europe. In the U.S., hopes for
significant fiscal stimulus have been dampened by ongoing political noise in Washington. Meanwhile, despite soft
readings of inflation and real economic growth, a tight labor market and strong gains in asset prices have led the Federal
Reserve to raise interest rates twice this year and to layout an ambitious plan for reversing quantitative easing asset
purchases (buying bonds for the Federal Reserve balance sheet). It is expected that through this process, the Federal
Reserve will release $600 million in U.S. bonds to the global markets by simply not repurchasing the assets upon
maturity. Overseas, centrist election victories and stronger economic numbers have reduced fears of further turmoil in
Europe. Additionally, growth has picked up in Japan, and while the performance of emerging market economies has been mixed, more attractive valuations and the lower dollar have encouraged U.S. investors to consider international equities.

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