Market Update: Q3 2018

Market Update: Q3 2018

Normally when I write my quarterly market update, I don’t begin until a few days after the quarter’s ended. This gives me time to digest the data from the previous three months, and synthesize it into (hopefully useful) thoughts about what’s going on in the markets and in the world, and how that might impact your portfolio.

I also get some help with the research. You’ll notice many of the charts I use come from Dimensional Fund Advisors, and I leverage economic & financial data from many of the financial periodicals I read, like Barron’s, Wall St. Journal, and Financial Times.

I’m starting with this background because U.S. stock markets had a very strong third quarter, with the S&P 500 up 7.71%. In the first few days of the fourth quarter, the story has been starkly different. The Dow Jones fell about 800 points yesterday, and the financial media would have you believe the world is about to end.

To put some context to yesterday’s drop, the S&P 500 fell 97 points. This represents about 3.4% of its total value. Since the bear market in 2009 ended, yesterday marks the S&P’s 20th day losing 3% or greater.

And as painful as it is to see the value of your portfolio fall, we really haven’t lost that much ground. As I write this, the index is trading at about 2770, which is a low we haven’t seen since….June.

So before we dive into what happened in the third quarter, don’t be alarmed if the current sell off continues. It was always bound to happen. My guess is that it’s only a short term “pressure release valve”. But even if it’s not, your strategy shouldn’t change because the market lost a few points. Your portfolio should be built with this expectation in the first place.

Market Update: Q2 2018

Market Update: Q2 2018

Stock markets here in the U.S. are traditionally pretty quiet over the summertime.  The kids are out of school, the weather is hot, and many financial managers, traders, and practitioners prefer to spend their time on vacation or in the pool. 

But like many industries, finance is changing rapidly today, and traditions are being upheld less frequently.  This summer, while the markets have more or less adhered to the summertime lull tradition, the financial news has not.  Among other topics of note, we have:

  • New tariffs on imports here in the U.S., and escalating trade tensions as a result;

  • Unceasing & fresh political headlines, and;

  • A tightening monetary policy by the Federal Reserve Bank here in the U.S.  

In response to all this, markets here in the U.S. haven't blinked.  (Or maybe they haven't opened their eyes yet).  Volatility continues to be extremely low compared to the last 25 years of returns data.  And that includes the returns of bonds and foreign currencies too, not just stocks. 

Nevertheless, even if the market doesn't feel that all this news is worth rolling over for, it's important for us to keep an eye on what's going on.  Read on for our quarterly update on the global capital markets.