Global financial markets were dominated
by rising share prices in the second quarter of 2017. However, economic trends
were little changed, inflationary patterns were quite muted, and significant
policy shifts remained elusive. During the period, bond yields moved little and
the U.S. dollar fell.
In the U.S., real GDP appears to have completely
recovered from its soft first quarter performance. With preliminary data in
hand, it now appears that second quarter output grew at a 2.5% annualized pace.
If accurate, this would imply year-on-year real growth running at a 2.5% pace,
still soft but well above rates feared earlier in the year. Job gains,
according to the payroll data from the U.S. Bureau of Labor Statistics,
rebounded in June, adding 222,000 in the month. The June unemployment rate rose
slightly to 4.4% from 4.3% in May. Despite this evidence of a much improved
jobs market, so far there have been few signs of an acceleration of any kind
for wages and salaries, with hourly wages up 2.5% year-on-year. Likewise,
consumer inflation gauges have remained remarkably tame. Year-on-year gains for
the core Personal Consumption Expenditures deflator have fallen back to only
1.4%. Steady growth with healthy jobs gains but no inflation seems to be the
quarter, the S&P 500 Index2 advanced 3.09% and the Nasdaq Composite Index2
rose 4.16%. Equities generally rose in tandem around the globe, with the Nikkei
225 Stock Average Index2 up 6.11% for the quarter. Shares in emerging economy
companies also did well, with the MCSI Emerging Markets Index2 up 6.27%.
European markets also rose nicely, with the MSCI Europe Index2 returning 7.37%
for the quarter. Bond yields were mixed, with the U.S. 10-year Treasury note
essentially flat and the German 10-year bund up slightly. The dollar continued
to surrender post-U.S. election gains, falling versus the Euro by 7.3% for the
quarter, and sliding by 3% versus a broad index of currencies. In the commodity
markets, oil prices dropped from $48 to $45 a barrel during the quarter, using
West Texas Intermediate (WTI) as a proxy. Gold was flat for the period, and the
Goldman Sachs Commodity Index (CME) was down slightly.
of market capitalization, large cap stocks outpaced small cap stocks, as the
Russell 10002 and Russell 20002 indexes posted quarterly
returns of 3.06% and 2.46%, respectively. As for investment style, growth
stocks took the reins in the quarter as the Russell 1000 Growth Index2 and the Russell 1000 Value Index2 posted quarterly returns of 4.67%
and 1.34%, respectively.
Growth Fund posted a return of 7.02% for the second quarter, outperforming its
benchmark, the S&P 500 Index, which returned 3.09%.
selection and an overweight allocation in the Information Technology sector3,
one of the strongest-performing sectors of the benchmark index, was one of the
largest drivers of performance during the period. The Fund’s lack of exposure
to the Energy sector, the weakest-performing sector of the benchmark index, also
aided performance. The Fund benefitted from stock selection and an underweight
allocation to the Consumer Staples sector, as well as an overweight allocation
and stock selection to the Health Care sector.
selection in the Consumer Discretionary sector was a slight detractor from
underweight stance in the Financials sector marginally hindered performance, as
the sector’s return outpaced the benchmark return during the period.
For more information, please click here for the Marsico Growth Fund Quarterly Investment Update.