Here is the latest Business View article from James Penn of Thomas Miller Investment

The good news is that it has been another decent quarter for investors.

Stock markets have put in a strong start to the year, with returns for most markets positive, in a range of low to high single digits, building on the strong gains for 2016 as a whole.

The US stock market, as represented by the S&P 500 index, and Europe, represented by the Eurostoxx 50, have both returned just under 6 per cent in capital terms for the quarter.

The FTSE100 has lagged in Q1, returning 3 per cent, with the mid-250 index outperforming at 5 per cent.

Emerging markets have done well, in particular Latin America, assisted by a recovery in their currencies against the US Dollar.

The one disappointment among the major markets has been Japan, with a 1 per cent fall in the Nikkei index, hampered by renewed strength in the Japanese Yen since the start of the year.

Over the past month, though, we have seen some reversals, with distinct outperformance coming from Europe.

The Eurostoxx gained 4.8 per cent in March in local currency terms, set against a small decline in the Dow Jones and a flat performance from the S&P500. Germany and France both rallied 3-4 per cent, while Spain returned over 8 per cent in March.

Both the Dow Jones Industrial and the S&P 500 index are off their highs, with the Dow suffering an eight day losing streak in the second half of March.

Meanwhile, strength has not been evident in all US indices. Small Caps, and the Dow Jones Transport index, have put in lacklustre performances, largely treading water since the start of the year, while US mid-caps have also underperformed.

It is significant that the Dow Jones Industrial peaked at 21,115 on March 1, in the wake of President Trump’s Budget speech.

This was well received, and seemed to fulfil all the promise of the ’Trumpflation’ trade, dominant since November.

However, the Dow has drifted off since then, with a big fall in the middle of the month after the attempts to reform the Affordable Care Act or ’Obamacare’ failed. Although the Republicans have a majority in the House of Representatives, rival factions could not agree on a replacement, and Trump has decided to drop the issue.

While this had immediate repercussions for heathcare stocks, in particular hospital and insurance companies, it also had implications for the wider stock market.

If someone as determined as Trump cannot reverse a flagship reform issue, then perhaps he will find it difficult to pass some of the other controversial legislation planned for later in the year regarding tax reform, and relaxation of regulation.

The Nasdaq, meanwhile, has held on to its gains, and is still standing at the highs it reached on March 1, with the largest constituent, Apple, continuing to surge ahead. Apple has blasted through its previous high of $130 of 18 months ago, and hit $144 in recent days.

Other major constituents like Oracle and Cisco have also made ground, while the SOX (Philadelphia Semiconductor index) has risen by two thirds in just over a year, and is now standing not far off where it was at the time of the ’dot com’ boom in 2000.

While perhaps a bit fanciful, it is tempting to see the Dow Jones index as representing Trump and the Republicans, and the Nasdaq index as representing the Democrats, with recent political victories for the Democrats reflected in the Nasdaq’s superior performance over the past month.

Meanwhile, European stock market outperformance may have further to run, particularly if Trump’s political agenda has stalled.

On the bond side, fixed interest has continued to deliver small returns, even at low yields.

Overall, investment professionals can be reasonably confident when reporting to clients over the next few weeks.

The opinions stated are those of the author and should not be taken as investment advice. Any recommendations may not be suitable for all, so please contact your financial adviser for further guidance. The value of investments can go down as well as up.