3Rd Quarter 2017 Market Review And Commentary _ Seeking Alpha 1 bitcoin value

The market continued its upward climb in the 3rd quarter tacking on several more percentage points to its year-to-date gains and posting its 8th consecutive quarterly gain. There have been few places in the global markets where you haven’t been able to make money in 2017. Heck, russia, which has been down virtually all year, swung back to the positive recently. That leaves the energy sector as pretty much the only loser this year.

^DJI data by ycharts

In the third quarter, the dow added another 5% and the SP 500 gained 4%. The nasdaq led the way again with a gain of nearly 6%. The SP 400 midcap index posted a relatively modest advance of 3%. Small-caps rallied hard in the last month of the quarter to close up nearly 6%. On the year, mid-caps and small-caps are up around 8%, large-caps are up 13% and the nasdaq has gained more than 20%.1 bitcoin value


The second quarter earnings season followed up on a strong Q1 as SP 500 companies delivered 10.3% earnings growth in Q2. It marks the first time that the index has reported double digit growth in back-to-back quarters since 2011. Companies remain generally bullish with their forward guidance as earnings growth in the high single digits is expected over the next one to two quarters. 70% of companies beat their sales estimates, also the highest number since 2011.

The economy

The unemployment rate held steady at 4.4% in the quarter as the economy has added more than 1.4 million jobs in 2017 through the end of august. There’s some concern that the fed’s interest rate plans don’t necessarily line up with current data. The inflation rate fell back below the fed’s 2% target in recent months.1 bitcoin value janet yellen’s testimony coupled with the fed dot plot report suggested that the fed is forecasting four rate hikes between now and the end of 2018. Pushing rates north too fast without corresponding pricing pressures could end up stifling economic growth and likely push the financial markets lower. Yellen struck a bit of a more dovish tone last month, suggesting that maybe she’s reevaluating the future path of rates. Currently, the fed futures market is saying there’s an 83% chance of a rate hike in december. Washington

The markets have gotten a bit of a boost lately thanks to details emerging about the president’s tax reform plans. It’s a pro-business growth plan which includes reductions to the corporate tax rates, a message that has been consistent with the administration’s past positions.1 bitcoin value what’s less clear is how it will affect middle class citizens as early analysis suggests that they could be negatively impacted by the changes. With healthcare seemingly off the table again (although who knows if it will be revived again at a moment’s notice), tax reform will be the white house’s latest attempt at a major legislative victory. Tech continues to lead; energy and materials make big gains

The tech sector has been the economy’s best performer for most of the year, and it was the top performer again in Q3. The technology sector ETF ( XLK) gained another 8% in the quarter putting it up more than 20% since the year began. What may be a bit surprising though is that the quarter’s next best performing sectors were energy and materials, with both gaining 6-7%. The energy sector ETF ( XLE) is still down around 7% on the year as a whole, but the materials sector ETF ( XLB), which invests in companies such as dowdupont ( DWDP) and monsanto ( MON), has actually turned in a pretty good year so far posting an overall gain of 16%.1 bitcoin value

XLK total return price data by ycharts

The financial sector ETF ( XLF) has been on a tear over the past month. In the past four weeks, the fund is up 10%. Consumer staples ( XLP), consumer discretionary ( XLY) and real estate ( XLRE) – three sectors of the market favored by dividend growth investors – are among this year’s weakest performers which helps explain why some of the most popular dividend etfs such as the powershares SP 500 high dividend low volatility ETF ( SPHD) and the ishares select dividend ETF ( DVY) have failed to keep up with the broader market. Is the fed’s rate hike plan too aggressive?

I touched on it above already, but the big question for the economy now is whether or not the fed can find the right balance between raising interest rates and keeping the economy chugging along.1 bitcoin value inflation and wage growth will be the two key numbers to watch. If those numbers start climbing, expect a greater likelihood of more rate hikes in the offing. Another wild card in the equation is the fed’s plan to slowly wind down its balance sheet. As you’ll remember, the fed scooped up billions of dollars in treasuries in order to provide liquidity to the economy post-financial crisis. That stimulus has been propping up the economy ever since, and the fed has indicated that they’re finally ready to begin deflating the bubble. At the rate they plan on unloading assets, it will take years before the fed’s asset balance looks like it did before. Selling treasury assets could end up acting like a “light” version of a rate hike. Will the fed’s balance sheet unwind change their interest rate policy in 2018 and beyond?1 bitcoin value does the flattening treasury curve indicate trouble ahead?

The treasury yield curve continued to flatten in Q3 as it has for most of the year. Rates as a whole, however, moved higher in the latter half of the quarter in anticipation of future rate hikes from the fed.

1 year treasury rate data by ycharts

The spread between 2 year and 10 year treasuries has narrowed from 1.25% at the start of the year to around 0.85% now. Investors often worry that a narrowing yield curve is a predecessor to recession. History has shown us that this is not necessarily the case, at least not immediately.

In some cases, the market can go years before experiencing a recession. In the 1990s, the 10-2 year spread narrowed for most of the decade before we finally experienced a recession. The real recession indicator seems to be when the 10-2 year spread goes negative (i.E. 2 years pay more than 10 years).1 bitcoin value for now, we’re a ways away from that point. Is the oil rally for real?

Just as I talked last quarter about oil being stuck in the $40s, and then all of a sudden, oil shoots up by $10 a barrel.

WTI crude oil spot price data by ycharts

The move has done wonders for energy stocks. As mentioned already, the energy ETF was up 7% during the quarter. The powershares SP small cap energy ETF ( PSCE) is up around 30% since august 21st alone (although it’s still down more than 29% on the year as a whole). Oil has had a tough time holding that $50 level and it just slipped (barely) back below the $50 mark just this week. I put the over/under at $45 for the price of oil at the end of the year. That level still feels right.

Is gold going up or down?

Gold has quite a volatile quarter. After starting july at around $1360, it soon dipped all the way down to $1125 before rebounding back towards the $1350 level again.1 bitcoin value

Gold price in US dollars data by ycharts

The market seems to feel good about the economic possibilities that come with tax reform, and gold has eased off of recent highs as a result. I think interest rates will be the catalyst for where gold prices head over the next year or so. If the first 9 months of the trump presidency is any indication, tax reform is far from a sure thing. Indications that it might not pass could push gold prices right back up again. Is bitcoin looking bubbly?

I probably don’t need to tell you that the price of bitcoin keeps rising.

I joked in my Q2 update after saying that bitcoin probably needs to pull back a little. I said that “now that I said that, it’ll probably be above $5000 in the next few weeks.” well, it didn’t happen in a few weeks, but it did happen by the end of august!1 bitcoin value bitcoin is now back around $4200, but every pullback to this point has only been met by rapid demand. I think that the approval of a bitcoin ETF could be a big catalyst for the currency and it may be arriving sooner rather than later. The winklevoss ETF ( COIN) is technically still alive and would, in theory, hold physical bitcoin, but ETF proposals made by REX and vaneck would hold bitcoin futures instead (vaneck has withdrawn its filing but REX’s is still a go). The SEC originally rejected the winklevoss ETF on the grounds that there was a lack of regulation. The derivatives exchanges are looking like they’re more willing to work with bitcoin. If bitcoin futures gain acceptance, then a bitcoin ETF based on those futures shouldn’t be far off. And a bitcoin ETF should send its price heading higher again.1 bitcoin value it’s far from a certain path, but it’s easy to see how that could be where bitcoin is headed next.


At this point, the table seems to be set nicely for a solid finish to 2017. The fed’s plan for interest rates could be the biggest potential disruption for the markets in Q4 (barring an unforeseen event like nuclear war, of course). The bulls remain in control of the markets and the current uptrend remains intact for now.

Investors have made money in just about everything this year, but that won’t be the case forever. I believe that soon it’s going to be more of a picker’s market with value stocks finally taking the lead again. For now though, enjoy the calm uptrend while it lasts!


On seeking alpha, I focus on ETF analysis and longer-term investment strategies. If this is consistent with your investing interests and goals, I’d love for you to follow me by clicking on the orange follow button next to my name.1 bitcoin value even if you don’t, thanks for taking the time to read!


Disclosure: I am/we are long SPHD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from seeking alpha). I have no business relationship with any company whose stock is mentioned in this article.