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Monthly Market Memo

September Monthly Market Memo

Monthly Market Updates for September 2018

Please find this month’s market updates below. This list is intentionally brief and uses ETFs that are readily available to all investors to represent the major markets. In the second section are five simple portfolio mixes; three of which are described by low-cost Vanguard mutual funds, while the other two are low-cost ETFs. These can be used as a guide against which to compare your portfolio mix. We hope these few, but important data points, are of value to you.

– the AdvicePeriod Team

Major Market Index Returns – Period Ending 9/30/18 (Annualized)

Selections include ETFs generally available to consumers. Returns are net of management fees but do not include trading and Advisory fees. Return source: Morningstar. AP disclosure.

Sample Portfolio Mix Returns (Annualized)

Global portfolio mixes are Stocks/Bonds and are represented by ACWI/AGG** or Vanguard funds where available. Funds are net of all management fees but do not include trading and Advisory fees. Return source: Morningstar. AP disclosure.

Things to Consider

Global equity markets were muted in September. The US stock market was up 0.57%, international equity markets were up 0.78% and emerging markets were down 0.53%. The S&P 500 hit another all-time high during the month while foreign markets continued to struggle.

The 10-year US treasury interest rate ended slightly above 3.0%. During the month the Fed Funds rate increased to 2.25%, as the Federal Reserve continues to signal further rate hikes for the rest of 2018 and into next year.

The US Stock Market is in the Lead. For Now.

Contrary to what many believe about the stock market, things that have been working have a tendency to continue to work – until they don’t. At present, many US stocks are not only at their highest levels but on a price/earnings basis, US stocks are trading at a 12% premium to an MSCI index of 22 international developed markets and 24 emerging markets. That is the biggest gap since 2009, according to the Wall Street Journal.

Nevertheless, emerging markets returned close to 40% in 2017 despite their lackluster performance thus far in 2018. On average, investors would be happy to have had that asset class in their portfolio. Since no one can reliably predict how markets will perform in a given year, the most reasonable approach is to diversify; especially if you are taking income from your portfolio.

Remember – you get rich being concentrated, but you stay rich being diversified.

What You Pay For: The Percentage of Active Managers That Underperform Their Benchmarks

Trailing 10 Years Numbers As of December 31, 2017 — S&P SPIVA Scorecard

The SPIVA Scorecard is a robust, widely-referenced research piece conducted and published by S&P DJI that compares actively managed funds against their appropriate benchmarks on a semiannual basis.

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