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J.P. Morgan Commentaries


Volatility Returns to U.S. Equities as Confidence in Trump’s Pro-Growth Agenda Fades

Dennis Ruhl, Portfolio Manager, NexGen U.S. Growth Funds

Volatility returned to U.S. equity markets as investors began to question the ability of President Trump to fully implement his pro-growth agenda. The S&P 500 Index reached a new all-time closing high of 2395.96 on March 1. However, equities started to drift lower as opposition to the American Health Care Act of 2017 (AHCA) increased while crude oil prices fell below $50.00 a barrel. The S&P 500 experienced its first 1%* decline since October 2016 on March 21as it became apparent the AHCA would not have the votes to pass through the House of Representatives. Equities recovered in the month’s final week as President Trump immediately shifted his focus to tax reform. Small-cap stocks measured by the Russell 2000 Index gained 0.13%* and barely outperformed large-cap stocks as represented by the S&P 500, which rose 0.12%*.

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U.S. Equities Climb on Favourable Earnings and Economic Data

Dennis Ruhl, Portfolio Manager, NexGen U.S. Growth Funds

U.S. equity markets climbed higher consistently throughout February as fourth-quarter earnings results were solid and nominal economic growth continued to strengthen. Despite some theatrics from Washington, optimism remains for President Trump’s pro-growth agenda. The S&P 500 Index reached a new all-time closing high of 2,369.75 on February 27. Large-cap stocks as represented by the S&P 500 Index gained 4.0%*, outperforming small-cap stocks measured by the Russell 2000 Index which rose 1.9%.*

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Markets Hit a New High on Positive Economic Backdrop

Dennis Ruhl, Portfolio Manager, NexGen U.S. Growth Funds

U.S. equity markets continued to advance in January as fourth-quarter earnings results were solid and economic data pointed towards continued growth, which offset declining optimism that President Trump can fully implement his pro-growth agenda. The S&P 500 Index reached a new all-time closing high of 2,298.37* on January 25. U.S. equity markets drifted lower in the month’s final days as President Trump signed executive orders on trade policy and immigration. Investors fear that the president’s stance on trade and immigration are counterproductive to the pro-growth policies he looks to implement. Large-cap stocks as represented by the S&P 500 Index gained 1.9%*, outperforming small-cap stocks measured by the Russell 2000 Index, which rose 0.4%*.

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Drivers of “Trump” Rally Remain Intact

Dennis Ruhl, Portfolio Manager, NexGen U.S. Growth Funds

U.S. equity markets continued to advance in December as the S&P 500 Index made its 18th all-time closing high in 2016 of 2,271.72 on December 13. The drivers of the “Trump” rally remain intact as investors continue to anticipate corporate tax reform and less regulatory pressures from Washington. December also marked the first increase in interest rates by the Federal Reserve (Fed) since December of last year. As 2016 drew to a close, equity markets drifted lower as the post-election enthusiasm started to fade along with the lack of news flow heading into the New Year. Small-cap stocks continued to outperform large caps. Small caps as measured by the Russell 2000 Index rose 2.8%*, outpacing large caps as represented by the S&P 500 Index, which advanced 2.0%*.

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“Trump” Rally Sparks Sector Rotation into Cyclical Stocks

Dennis Ruhl, Portfolio Manager, NexGen U.S. Growth Funds

U.S. equity markets rallied in November as Donald Trump unexpectedly upset Hillary Clinton in the 2016 U.S. presidential election. Additionally, the Republican Party’s sweep of Congress boosted investor sentiment. The “Trump” rally propelled the S&P 500 Index to an all-time high of 2,213.35* on November 25. Since President-elect Trump’s initial policy proposals are anticipated to be pro-growth, bonds yields rose significantly and the U.S. dollar strengthened. Small-cap stocks, which derive the majority of their revenues in the U.S., were the clear winners in November. Small-cap stocks as measured by the Russell 2000 Index rose 11.2%*, dramatically outperforming large-cap stocks as represented by the S&P 500, which advanced 3.7%*. While the overall gain for the S&P 500 was relatively modest, a severe sector rotation occurred over the next several trading sessions.

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