School has officially started and fall is around the corner, bringing shorter days, cooler weather, changing colors, and not to mention the World Series and football season. The start of the school year tends to be a time of excitement and renewed focus, which is apropos for this 401k update. Login to your 401k account and make sure you are allocated correctly, as this year has been volatile and we have a pending presidential election along with a Federal Reserve that wants to raise rates. Let’s take a look at the investing landscape:
Summary, Last Qtr: Last quarter saw some appreciation, albeit subdued appreciation, in the equity markets as the possibility of a Federal Reserve rate hike decreased. For the year, dividend paying “blue chip” stocks have outperformed growth stocks, but that trend was reversed last quarter as growth stocks made up some ground. Bonds are still paying historically low yields, making it frustrating for people to find returns in the b0nd markets, not to mention a savings account at your local bank paying much of anything. It doesn’t look like this will end any time soon, as the Federal Reserve decided to pass on a possible rate hike.
Our Commentary: Our expectation for this year was volatility caused by uncertainty, which appeared at the beginning of the year with the sell-off we encountered. Since then the markets have been fairly normal, but we still have a presidential election to go. Presidential election years tend to embolden market pundits who like to predict what may happened if a certain candidate is elected. The reality of the situation is that no one really knows what will happen, and the general theme still prevails. The Federal Reserve is watching incoming economic data, as they said they would, in order to justify a rate increase, with the emphasis being on “when”, not “if” a rate hike happens. Employment numbers have been strong which is encouraging, but the numbers haven’t been strong enough to compel the Fed to act – yet. Because the Fed needs some room to lower rates in the future if they need, they are intent on rising interest rates. Brexit was thought to be a possible impetus of a market correction, but that turned out to be a blip on the radar. There is a chance of a bigger impact on the European Union from Brexit, but we don’t know that yet and trying to predict what may happen, and when, is a fool’s game. Thus we are staying away from the international markets. Additionally, we believe it would be wise to plan for market volatility and to keep a steady hand if the markets get volatile, as we still favor the U.S. markets, both bond and stock, over all other countries at this point, and that inherently comes with a Federal Reserve that wants to slow down U.S. growth.
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.