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Second Quarter 2017 Investment Commentary

The second quarter proved to be another very strong period for global stock markets. Larger-cap U.S. stocks (Vanguard 500 Index) gained 3.1%, developed international stocks (Vanguard Developed Markets ETF) rose 6.4%, European stocks (Vanguard FTSE Europe ETF) jumped 8.4%, and emerging-market stocks (Vanguard Emerging Markets ETF) rose by 3.4%. First half 2017 stock performance was even stronger. Larger-cap U.S. stocks surged 9.3%, while international indexes were each up in the mid-teens. In a reversal of May’s sector trends, U.S. financial stocks rallied in June on strong results from the Federal Reserve’s “stress tests” plus more positive sentiment given rising interest rates, while technology shares declined. Commodities prices and energy stocks remain a weak spot amid a global rally in risky assets. Oil prices fell 14% during the quarter and nearly 20% for the first half of 2017 on fears that production will continue to outstrip demand.   As we look back...
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First Quarter 2017 Key Takeaways

The buoyant mood that pushed stocks higher through year-end 2016 continued into the first quarter as signs of an improving global economy continued to mount. Stock indexes were up across the board. Emerging-market (EM) stocks were the star performers.  (MSCI EM index +11.6%).  Their double-digit gains eclipsed returns for developed international stocks (up 8%), and both outperformed larger-cap U.S. stocks (up 6%). Price-to-earnings multiples in most EM countries’ equity markets remain at the lower end of their 20-year averages, and we expect growth in emerging countries to outpace that of developed markets over the long term.   Investors took the Federal Reserve’s widely anticipated rate hike on March 15 in stride, treating it as another indicator of the U.S. economy’s return to form.  Wage growth has returned, unemployment is well below 5%, and inflation is close to the 2% target.  The Fed is now turning its attention to reducing its $4.5...
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2016 Election Results

Mr. Donald J. Trump is slated to be the 45th President of the United States of America.  Mr. Trump clearly won the electoral vote yet lost the popular vote.  Mr. Trump and his party will have full control of the Senate and the House.  Short-term political market reactions should be met with skepticism.  We all experienced the initial impact of Brexit earlier this year, and we all experienced the relatively rapid recovery.  A victory for Mr. Trump was not priced into the markets at their close on Election Day, and it seemed the markets called the election results first with their rapid sharp declines (which did not last) as the results were unfolding. Markets are pragmatic and fundamental and find their way to a fair pricing.  An idea Mr. Trump spoke during his campaign is not an executed idea at this point, and we typically do not see quickly being the...
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