Three Down, One to Go - Quarterly Market Review

I love this time of year. The days are still relatively warm, and the nights, a little chilly. Pumpkin spice lattes are back (if you’re a fan), and people have their Halloween decorations on display, ready for the little ghosts and goblins to visit in a couple of weeks.

Right now, the financial markets seem a bit like the season – pretty sweet, with the potential to be a little scary. Overall, the markets, both in the U.S. and abroad, remain strong, despite some recent volatility from our recent natural disasters and geopolitical dust-ups. Even as we faced multiple hurricanes and increasing tensions with North Korea, several key market indexes achieved record highs in the third quarter, driven by strong corporate earnings and solid economic data. But there’s more to come: This quarter, we may see some volatility as the government tackles tax reform, next year’s budget, and decisions surrounding the debt ceiling. We’re three quarters down, with one to go – and 2017 may still reveal some surprises!

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 In Q3, U.S. stocks finished up 4.5 percent, but we saw even better numbers from European stocks and emerging markets. Developed markets produced 5.5 percent returns, while emerging markets posted 7.0 percent returns. Here at home, growth-oriented stocks outperformed defensive ones, and small-cap stocks outpaced large-cap companies by nearly 120 basis points.

The economy just keeps chugging along. Higher employment numbers offset some of the weakness we saw in the homebuilding sector, and the U.S. Gross Domestic Product in Q2 grew by 3.1 percent, the fastest growth rate since Q1 of 2015. Consumer spending fueled the increase, which surpassed President Trump’s goal of three-percent growth. However, we still need to see the Q3 and Q4 numbers to know whether the economy met his goal on an annual basis.

The Federal Reserve Board declined to raise interest rates in September, but could still do so before the end of the year, despite weak inflation. In the meantime, the Fed has announced its plans to reduce the $4.5 trillion in debt that it has purchased since Great Recession.

So, what should all this mean to you? At the risk of sounding like a broken record, I believe evidence speaks louder than forecasts. By depending on practical evidence, we at AMDG Financial rarely change our mantra on investing, which remains:

  • Buy, sell and rebalance your portfolio according to your own carefully crafted plans.
  • Focus on an efficient, evidence-based approach to capturing the market’s durable returns while managing its related risks.
  • Ignore the market’s daily distractions, especially its fleeting dips and rallies; they’re far more likely to block the view toward your higher goals than to yield big wins through the chase.

 One of the advantages of working with a competent, ethical fiduciary financial adviser is the adviser’s ability to help you avoid making emotional investment decisions in response to the headlines. Our goal is to help you stay on track to meet both your financial and life goals. If you have questions about the events of Q3, or would like to discuss creating a financial plan with us, please contact us for a complimentary, no-obligation appointment. We’d be glad to help.

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