With June behind us, we are now half way through 2017. The stock market has held its gains from earlier in the year and shrugged off the domestic as well as global uncertainties that dominate the airwaves. The S&P 500 Index of the 500 largest US stocks ended the month of June up slightly at a gain of nearly ½ of one percent.
The market surged in January and February and then consolidated for three months. In June it broke-out of the consolidation pattern but struggled to make any significant progress. Technicals are positive and indicate that there could be more upside to come, but July may be choppy as investors continue to deal with uncertainty.
Congress is at the center of the uncertainties facing investors. The clock is ticking on the need to increase the debt ceiling, no headway is evident in changes to the health care plan, and the President’s proposed tax breaks may not get to a vote in 2017. Resolving some of these issues could inspire investors and increase stock market prices in the last half of the year.
Even with another increase in the Fed Funds rate in June, we still have historically low interest rates. With short term rates at 1% to 1.25% that is 4 times less than prior to the recession of 2008-2009. Lending is likely to remain attractive for the foreseeable future which should help businesses and home-buyers. With rates this low, a recession in the near term is highly unlikely.
The outlook for the market in 2017 remains positive. Don’t be discouraged by some bumps along the way because we are in the summer months which are historically challenging for the market.