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November 2017 Market Review

The US market seems to be excited about corporate tax cuts and is charging ahead. Interestingly, value stocks kept up with growth over the past quarter and slightly beat growth for the past month. Despite all the headline news, there is still something attractive about a 3% or 4% dividend from a defensive company. We will continue to rebalance by selling large growth if over your target allocation and buying other asset classes. With one month left here are the numbers year-to-date: Large growth up 30%, large value up 13%, mid growth up 25.2%, mid value up 11%, small growth up 24% and small value up 7.5%.

Internationally, developed markets and emerging markets held on to their gains but the price growth slowed. We still see economic growth in these geographic areas for the next 12 months. MSCI World ex-USA is up 22% year to date and MSCI EM is up 30% year to date.

Despite cries about valuations being too high or historically high (they are), there is nowhere to go.  Interest rates remain extremely low and real rates (2.36% nominal rate minus 2% inflation rate) are near zero. But the equity market is a leading indicator. So, the market is telling us the economy is going to grow and has sufficient means to do so. There are no indications right now that the market is wrong.

There could be a pull back (less than 10%) if the tax bill doesn’t pass but we expect it will be short lived. Passage of the tax bill is probably already baked into stock prices.

Have a safe holiday season. Call us if you have questions or concerns.

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