Kai W. Hong, CFA
Managing Partner & Chief Investment Strategist
With little in the way of substantive news events, optimism propelled the markets forward as investors anticipated a continuation of steady economic growth, good corporate performance, and accommodative monetary policy. US consumer confidence rose to its highest levels in nearly 17 years as various market indexes hit record highs. Corporate M&A activity was robust as corporate and private equity cash supported transactions. As expected, the US Fed left its policy rates unchanged but signaled a likely increase in December. The progression of work on the Republican tax plan also served to buoy investor sentiment with market movements sometimes influenced by changing assessments of the likelihood of passage. Should the tax plan pass, investors would have to determine how much of any potential positive impact is already priced in. A lot of attention was also given to the remarkable rally in bitcoin (+1,200% this year!) as option exchanges prepared for the launch of futures contracts. With people lined up on both sides of the debate, only time will tell whether bitcoin can live up to the hype that has driven its value to such lofty levels. On the geopolitical front, Brexit negotiations made slow and uneven progress, Saudi Arabia commenced a sweeping crackdown on corruption, and Venezuela was declared in default on its sovereign debt.
The Russell 3000 Index finished the month at +3.0%, extending the run of positive performance for the broad US equity market to thirteen months. The high-flying Technology sector took a breather for the month ending as the worst performer with a +0.8% return, with Consumer Discretionary (+5.0%) and Consumer Staples (+4.4%) leading. US small cap stocks lagged large caps slightly with the Russell 2000 Index returning +2.9% versus the Russell 1000 Index returning +3.1%. Outside of the US, the developed market MSCI World ex USA Index returned a more modest +1.0% while the robust rally in developing markets this year paused for the month with the MSCI Emerging Markets Index returning +0.2%.
