Q4 2017 |A Tale of Two Markets

Go beyond the headlines to help investors understand the latest market and economic data with insights from Putnam.

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A Tale of Two Markets (PDF)

Markets played offense

July 1—December 31, 2016

Offense outperforms in a pro-cyclical, inflationary market

  • During the second half of 2016, economic growth turned positive and the dollar strengthened. Inflation expectations increased, and the yield curve steepened.
  • Trump proposed Reaganomics-type policies, but with a different economic backdrop.
  • Earnings growth and earnings expectations improved. Equities outperformed fixed income, and non-traditional fixed-income strategies outperformed the Bloomberg Barclays Agg.
  • Within equities, value, small caps, and U.S. outperformed. Cyclical/financials sectors outperformed growth/defensive sectors.

Markets get defensive

January 1—September 30, 2017

Investors more cautious amid administration mishaps and legislative delays

  • The Trump agenda stalled, and the dollar began to weaken. Inflation expectations declined, and the yield curve flattened.
  • Equities continued to outperform fixed income. Growth/defensive sectors outperformed cyclicals/financials sectors. Growth, large-cap, and international stocks outperformed U.S. value and small caps.
  • Earnings and growth expectations sustained momentum
  • Leading Economic Indicators Index and yield curve not signaling recession, and there are no indications of economic recession over the next 12-18 months.