Q3 2016 was positive across the board for us, although interesting. The primary indicator of market trading—earnings—we’re expected to be low, and were actually forecasted too low. A majority of earnings reports beat that bar, and the overall stock market saw growth. As you know, when companies do well their value increases, and the limited quantity of equity shares also increase in value. Previous troubling news has overwhelmed us, and that interaction can get lost.
Going forward, we’re still looking at a bumpy road to year end. With a global environment of extremely slow growth, action being awaited from the Federal Reserve, and an extremely bizarre presidential election cycle coming to a close, the only thing we know for certain is that there will be a new president.
Listed below are returns of five major indexes, through the third quarter;
BarCap US Agg Bond -- 5.80%
S&P 500 -- 7.84%
Russell 2000 -- 11.46%
MSCI EAFE (Europe) -- 1.73%
MSCI EM (Emerging Markets) -- 16.02%
Every single one of our five portfolios all exceeded Q3 expectations, with Technology, Emerging Markets, and domestic Small Cap stocks taking the lead. In addition, we saw significant promise in our Energy allocations, but it is an area we may consider trimming as oil prices start to near a $55/barrel price. We’re looking at High Yield fixed income as a chance for the same: to take profits and search for greater value. The highest performing stock is attributed to our individual Apple positions, which got back on track within the S&P for a 19% Q3 jump.
We need to expect unpredictability in Q4, fundamentally because of the current election cycle and the coming Brexit implications. That being said, we expect a quarter that trades on fundamentals and will be positive for stock returns. Tech, Emerging Markets, Small Cap stocks, and Energy are still our favored positions. We’re eyeing Financial positions for prominent growth as well, predicting that rising interest rates with be beneficial to the segment. That, in turn, is why we are moving away from bonds, Utilities, and Real Estate Investment Trusts (RETIs), that are sensitive to those interest rates.
Your continued confidence and support is greatly appreciated. Don’t hesitate to contact us if there’s anything we can do to help.