March 2017 review and market outlook

Market commentary by Kim Mailey

April 4, 2017

Update on the “Trump Trade”

The first stage of the “Trump Rally” was based on a markedly improving economy as a result of Trump’s promised policies on tax reduction and fiscal stimulus. As the first stage was petering out, February began the second stage, reaching a climax after Trump’s address to the joint session of Congress with the Dow soaring 300 points the day after. During this time the markets rallied for 109 trading days without a daily decline of more than 1%. This was the longest such streak in more than twenty years.

March ’17 Y-T-D 1 Year 3 year 5 year 10 year
S&P/TSX Composite + 0.96% + 1.70% + 15.22% + 2.74%/yr. + 4.64%/yr. + 1.68%/yr.
S&P 500 (C$) + 0.15% + 4.38% + 17.60% + 15.00%/yr. + 17.44%/yr. + 6.73%/yr.
MSCI EAFE (C$) + 2.47% + 5.31% + 11.27% + 4.09%/yr. + 8.98%/yr. – 0.38%/yr.

* Source: Equity Index and Currency Data: Bloomberg. Data as of March 31, 2017

The recent 109 day rally sustained four North Korean missile launches, two U.S. Federal Reserve Bank interest rate hikes and several well documented tweets! To put this sustained rally in perspective, we have to remember that it wasn’t too long ago that a 1% decline in a day was considered a mere scratch. In 2008 it happened 75 times!


Markets have traded with a more cautious tone for much of March following February’s impressive gains. While markets likely require a period of time to digest the solid returns of the past few months, recent headwinds to the near-term upside have included benchmark oil prices falling below the $50/barrel mark, absorption of the Fed’s March rate hike, a loss of momentum in President Trump’s agenda (including failing to pass his first major legislation on Healthcare) and lingering European political uncertainty. In our opinion, I don’t view the Fed nor European political issues as major stumbling blocks for markets this year. In fact, clear guidance from the Fed at last week’s meeting that they are not contemplating a stepped-up pace of rate hikes should leave investors comfortable with the broader economic outlook and provide ongoing relief for international markets. For its part, the European political landscape is improving with the recent defeat of the anti-EU populist party in Netherlands’ mid-March election and polls in France suggesting far-right candidate Le Pen should lose by a wide margin in a possible second round presidential election vote. As for the U.S., the failed repeal/replace healthcare legislation had the potential to trigger a market correction over concern that the new administration’s hoped for tax cuts could be at risk. To date that has not happened.


In my view, fundamentals remain constructive for risk asset classes (equities) to once again be the best performing asset class in 2017. Equities are being propelled higher from strengthening economic growth, declining volatility, rising inflation and bond yields, low recession probabilities, improving flow of funds into equities and a recovery in corporate earnings growth.

The Fed has clearly stated their expectation of two more 25 basis point interest rate increases in 2017. The recent Dutch election was a litmus test for populism in Europe. As a result, fears over a rising tide in populism have been somewhat quelled. With coming elections in France, Germany and Italy, the German election poses the greatest uncertainty at this point. With the U.K government triggering Article 50 on March 29th, the two-year negotiation process has begun and is likely to be slow moving as the U.K exits the E.U.


In conclusion, for the portion of your portfolio intended to provide conservative growth, it should be weighted towards an actively managed, globally diversified equity portfolio. I expect equities to be the best performing asset class in 2017, but the road higher will not be a straight one! Expect some modest pullbacks during the year (mid-single digits), but I don’t believe you can time this. Rates are not expected to move higher in Canada for some time yet. Owning some bonds in your portfolio will lessen the volatility of a pure equity portfolio but they should be shorter-term maturities. Any larger amounts of capital that you may have to draw on in the next year should be set aside in interest bearing guaranteed securities.

Mailey Rogers Group is hosting two learning opportunities that may be of interest to you:

  1. Considerations for your transfer of wealth. The timing and the amounts should be considered to ensure the gift is more helpful than harmful. Join our Estate and Trust Consultant for a Lunch and Learn at our Ambleside office on Thursday, April 6.
  2. Smart Women – Smart Investor is a women-only social as part of our Women’s Initiative that will take place in the early evening of Wednesday, May 10 in our Ambleside office. Wine and cheese followed by the presentation.

Seating is limited for both, so please RSVP to Tannis Fuller at 604.913.7033 or

Mailey Rogers Group is here to help and we welcome any questions you may have.


Mr. Kim Mailey, CFP
Senior Wealth Advisor
Director, Wealth Management
Mailey Rogers Group
1555 Marine Drive,
West Vancouver
Tel: 604.913.7013
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