It’s hard to believe that 2016 is over. Aside from the February correction, fluctuating oil prices, or the UK’s decision to leave the European Union, 2016 was boring for investors. Then the election happened bringing with it the ‘Trump Rally’ for the stock market. Historically, November marks the start of the ‘best six months’ of the year, according to the 2016 Stock trader’s Almanac. After the election, the markets started to follow those historical trends. Only time will tell if it continues. There are reasons to be cautiously optimistic in 2017. Though I emphasize caution, here is why I’m optimistic.
The U.S. Economy has been leading most other countries and consumers are helping to fuel growth domestically and in other regions. Millennials, who now outnumber Baby Boomers in the U.S., have begun to demonstrate an entrepreneurial spirit and are stepping up their spending.
We are in an exciting time. Technological advances are unprecedented in many areas such as cloud computing, data and analytics, robotics, mobile and more. This will likely drive economic growth. It should benefit more sectors than just technology as the advances should fuel productivity across the economy.
Emerging Markets include millions of people pushing their way into the middle class and the middle class lifestyle, which include cars, homes, appliances and tech. This push into the middle class is expected to fuel the global economy.
What does this mean for investors? Each investor has very unique circumstances that cannot be overlooked, but generally speaking, here some key takeaways as we move through 2017.
Long-Term Investor
Returns for many asset classes could be below average for the next 10-15 years. With that in mind, we believe it’s important to employ a well diversified1 investment portfolio. Holding a mixture of assets may allow investors to take advantage of longer-term economic growth. All assets behave differently under different market conditions. Over time, fluctuations in holding multiple asset-classes typically smooth returns to provide less volatility in a portfolio.
Short-Term Investors
In our current environment of monetary easing, bonds have had an increase of inflows. This has caused bond prices to rise and yield spreads to diminish. The results are lower return expectations for fixed income assets. Nonetheless, bonds and cash may be appropriate asset classes to hold if you have a shorter time horizon or your risk profile indicates a more conservative approach.
Investment Income
For investors that are searching and are in need of income streams, we suggest constructing an income generating portfolio with a diverse mix of assets including dividend paying stocks, investment-grade short term and intermediate term bonds, and REITs. Some alternative investments also may provide attractive income opportunities. As always, if you have any questions, give me a call2.
1 Diversification does not guarantee profit or protect against loss in declining markets
2 Each investment carries a degree of risk, more details available when you call
This and/or the accompanying statistical information was prepared by or obtained from sources that Wells Fargo Advisors believes to be reliable, but its accuracy is not guaranteed. The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. Any market prices are only indications of market values and are subject to change. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request. CAR-1216-02826
