Equity markets led the way in the first quarter of 2017, with the S&P 500 Index up 6.07%. Other risk-asset markets such as emerging markets debt and corporate high-yield debt also performed well, up 3.87% and 2.71%, respectively. The positive backdrop for these asset classes continues to be that the U.S. economy is on solid ground, in our opinion, with unemployment claims near the 2000 decade low, increasing CPI, and Real GDP expansion. The proposed economic agenda under the Trump administration which includes lowering individual and corporate income tax rates, increased infrastructure spending, and reduced regulatory burden on businesses has the potential to accelerate the U.S. growth rate. While implementing the agenda in its entirety and the timing remain uncertain, it has nonetheless buoyed risk markets up to this point (Exhibit 1 & 2: Returns).
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