School is back in session and football season is here along with end-of-summer BBQ’s and cooler weather. So it’s time to look at how the markets did during the summer quarter and to give commentary on where we see things headed.
Summary, Last Qtr: Q3 saw good news for the economy as the Federal Reserve started to talk about “tapering” the quantitative easing “QE” program. While this is an indication that the economy is getting healthier, it translated into rough markets for investors. The equity (stock) markets responded negatively to the idea of less QE money available to purchase equities while the fixed income (bond) markets anticipated rising interest rates, which translates into lower prices. Thus Q3 saw negative performance for both the equity and fixed income markets.
Our Commentary: We continue to see fixed income as an area to reduce exposure. Interest rates are expected to continue to rise, which would decrease the value of bonds, especially longer term bonds. US equities continue to lead and we believe that will continue for the near future, with international equities also a potential area for positive developments. For investors that can tolerate the additional equity exposure, one would consider increasing equity exposure and reducing bond. For investors that do not want to take on the additional risk, this is a bit of a dilemma. Money markets are a viable option to weather the storm of the fixed income markets until rates get back to normal. We see the possibility of a “Santa Claus” rally, which is when equities (stocks) rise towards the end of the year, assuming there is no major conflict with Syria. A major conflict with Syria will change our view from positive to negative in the equity markets, at which time cash could be a safer place to allocate money.
Our Investment Committee periodically monitors the markets and will continue to provide comments at the beginning of each quarter. Each portfolio is different and we recommend getting individual help, which we are happy to provide.
Enjoy the fall and we will check back in Q4.
International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks, and differences in accounting methods. Past performance cannot guarantee future results.
Fixed income securities carry interest rate risk. Fixed income securities also carry inflation risk and credit and default risks. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties.
Opinions voiced are not intended to provide specific advice and should not be construed as recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial professional.