Broker Check

2017 First Quarter Investment Newsletter

April 17, 2017

The first quarter of 2017 is now behind us, and although we won't have complete economic data for a while, we do know that domestic stocks had a solid start to the year. Going forward in to the second quarter of 2017, we have many data points, policy updates, and economic indicators to focus on in the coming months. 

As of now, 2017 has started with strong market performance, high consumer confidence, and low volatility. 

How did markets perform in Q1?

Both major domestic indexes posted sizable gains in the first three months of 2017:[1]

  • S&P 500 up 5.5%
  • Dow up 4.6%

The NASDAQ's nearly double-digit growth represented its best quarter since 2013.[2]  

Majority of the markets' gains happened in January and February.[3] While the NASDAQ increased 1.48% in March, the S&P 500 stayed flat and the Dow lost 0.72% in the same period.[4]  

Which stocks outperformed in Q1?

Large cap stocks - companies with more than $5 billion in market capitalization - drove much of the growth we saw last quarter.[5] Tech stocks performed especially well, gaining more than 12% over the quarter.[6] In fact, S&P Info Tech, which tracks information technology stocks in the S&P 500, was the quarter's highest performing sector index.[7] 

How did politics affect market performance in Q1?

As the new presidential administration came to power last quarter, investors closely followed policy news and headlines. We encourage you to pay more attention to economic fundamentals than media reports, but we understand that completely ignoring political conversations would have been challenging in Q1. 

Overall, investor expectations for the new administration's pro-growth policies helped push the markets to numerous record highs last quarter.[8] However, when Congress chose not to vote on the American Health Care Act, market concerns increased about whether new policy changes would actually occur.[9] The Dow lost 317 points the week of the expected - but cancelled - healthcare vote.[10] 

How high was volatility in Q1?

Even though policy debates have seemed to heighten the emotional landscape this year, the VIX measure of volatility recorded its lowest Q1 average ever.[11] The 11.69 level is also the second lowest quarterly average since 1990.[12]  

What might we see in the 2nd Quarter and rest of 2017?

Earnings season is upon us, and investors will be watching to see whether reports match expectations. According to FactSet, the S&P 500's estimated earnings growth rate for Q1 2017 is 8.9% - which would be its best year-over-year earnings growth since 2013.[13] Only a handful of S&P 500 companies have reported their earnings so far; of these reports, 57% exceeded the mean sales estimate and 74% exceeded the mean earnings-per-share estimate.[14]  

In addition to earnings, the Federal Reserve's interest-rate decisions will be on many people's minds throughout 2017. After raising rates on March 15, the Fed expects at least two more increases this year.[15] So far, the markets absorbed these increases well, with the Dow even gaining 100 points on the Fed's last meeting day.[16] 

Claiming Employee Business Expenses

As an employee, you may end up making out-of-pocket purchases to support your workplace responsibilities. When you do so, you may be able to deduct some expenses. Here is further guidance to help you manage employee business expense claims. 

Is there any limit on how much you can claim?

Typically, yes. You're able to deduct employee business expenses that total more than 2% of your adjusted gross income. 

Are all expenses deductible?

No. The IRS has rules for the type of employee business expenses you can claim. The expenses must meet two criteria for your workplace responsibilities: be ordinary and necessary.

  • Ordinary: an expense that your industry identifies as common and accepted
  • Necessary: an appropriate expense that also helps the business

Are you eligible for more deductions through other retirement plan contributions? Click here for a retirement and tax planning reference guide by Oppenheimer.

What are common expense examples?

The below list represents a sample of expenses that you can typically deduct and meet the "ordinary" and "necessary" requirements:

  • Any clothes or uniforms you must wear at work and not for everyday use.
  • Any tools or supplies you need to do your job.
  • Education that supports your role at work.
  • Travel for work that takes you away from your home. 

To claim your expenses, you will need to file Form 2106, Form 2106-EZ, or IRS Schedule A. You can find further information on the IRS website

As always, we suggest that you discuss your specific tax issues with a qualified tax advisor, or give us a call if you have questions regarding your overall financial plan.

The views stated in this letter are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.