2017 Q3 Review & Outlook

October 23, 2017


In meetings with clients and investors, I’m frequently asked if and when stocks are going to fall.  Even though the stock market is making new highs, the level of investor confidence is not near the levels seen during the 2000 dot com bubble and the 2008 financial crisis. This leads us to the possibility that the bull market has further to run.

Since there seems to be a surprising lack of confidence in the stock market, an old Wall Street saying seems appropriate for today, “stocks always climb a wall of worry”. This past quarter, there was much to worry about; legislative failures, natural disasters, international political tensions, threats from North Korea and for many, the new Presidency.

Against this backdrop of worry, U.S. stocks quietly moved higher as 3Q17 came to the close. The quarter saw solid earnings growth, a firming U.S. economy, rising consumer and business confidence and a synchronized upswing in global economic growth. The rise marked the eighth straight quarter the S&P 500 index finished higher than the previous quarter.  Much like the like the 1Q17 and 2Q17, growth style of investing outperformed value style of investing.

Data released during the quarter generally reflected a healthy U.S. economy. After a weak first quarter growth of 1.4%, 2Q17 GDP grew by 3.1%, reflecting a rebound in personal consumption expenditures and solid capital spending. So far, the economic data is not suggesting recession is near.  To the contrary, the global economic picture continues to brighten. Recently, the International Monetary Fund (IMF) upwardly revised its forecast for global growth in 2017 and 2018 to 3.6% and 3.7%.

Corporate earnings continue to rebound. According to Factset, 2Q17 S&P 500 earnings increased 10.3% following a 14% increase in 1Q17, which is the first back-to-back quarters of double-digit earnings growth since 3Q11 and 4Q11. While 3Q17 S&P 500 earnings are only expected to grow 4.2%, analysts are looking for a return to double-digit earnings growth in each of the next three quarters. There is a high likelihood these numbers may be revised higher due to the colossal rebuilding needed after the disastrous hurricanes.



2016 Close

As of September 29

Month Change

Quarter Change

YTD Change













S&P 500






Russell 2000






Global Dow






Fed. Funds



0 bps

0 bps

50 bps

10-year Treasuries



21 bps

3 bps

-11 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.


As we head into the year’s final stretch, robust corporate earnings and economic data should help support stocks along with the prospects of a Republican tax overhaul.

For now, the path of least resistance for stocks seems to be upward, but we expect investors’ fortitude to continue to be tested in the coming months by elevated tensions between U.S. and North Korea, tax and healthcare debates, and decisions by the Federal Reserve to raise interest rates and wind down its unprecedented asset-purchase program. 

We are pleased that investors have focused on companies exhibiting strong growth characteristics and we expect this trend to continue; however, at some point the market may emphasize companies with more cyclical attributes. We don’t believe that time will come until it is evident there is concrete progress on tax reform and or fiscal stimulus.  For our private client portfolios, we plan on staying the course and wait for the market to tell us otherwise. We will continue to look for opportunities while staying vigilant.

As always, thanks for your confidence.


Best Regards,

Nadim Joseph Nahas

Portfolio Manager/Principal


All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

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The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.