U.S. Stocks continued to rise over the past three months to achieve record highs. Solid earnings and economic data have helped support the major stock market indexes despite tension with North Korea and disruptive hurricanes. The Standard and Poor’s 500 Stock Index rose 4.0% for the quarter. It has risen 12.5% since year-end. The Dow Jones Industrial Average increased 4.9% for the quarter and 13.4% for nine months.
International stocks also continued to perform well throughout the quarter, extending their outstanding performance since year-end. Economic growth in Europe and Asia has been the primary catalyst.
Bond prices have recently slipped a little, as interest rates have risen slightly. Bond prices move inversely to interest rates. Year-to-date, there has been little change in rates. The 10-year U.S. Treasury Note, aproxy for interest rates, yielded 2.33% on September 30th, compared to 2.30% on June 30th, and 2.45% at the end of last year.
With respect to the trend of the stock market going forward, we are encouraged because of a couple of factors. First, and perhaps most importantly, we believe there are no signs of a recession for the foreseeable future. Second, investors are still hopeful that tax reform will occur, especially at corporate levels. If the corporate tax rate is reduced to even 25% from 35%, analysts will be running new earnings projections, potentially making stocks less expensive relative to their estimated earnings for 2018.
We feel bond prices will increase modestly for the balance of 2017. While Janet Yellen said the Federal Reserve Board will raise rates in December and possibly three times in 2018, we believe those increases have largely been discounted. Rates will be influenced more as inflation and the economy improves.
We look forward to another productive quarter.