April 2018 Financial Markets Summary

Early April is a great time of the year as the seasons finally start to change, taxes are filed, April Fools jokes are played, a champion is crowned from the March Madness NCAA Tournament and the beloved Masters Tournament takes place.

We turn to an unlikely place for an investing lesson: Augusta, Georgia.  As the golfers make their rounds at the Masters Tournament this year, pay close attention to the country flags next to their names.  Schwab’s Jeffrey Kleintop identified a striking relationship between this and global investing.  The national diversity of players in the Masters tournament bears an uncanny resemblance to stocks in the MSCI All Country World Index (ACWI).  Much like the ACWI Index, the Masters has about 50% Americans, 16% from the Eurozone, 10% from the UK, 14% Emerging Markets and 10% Asia Pacific.

For the first 45 years, Masters champions were from only two countries, the United States and South Africa.  In contrast, winners in the past 35 years have come from many different countries.  In fact, six out of the past ten winners have been from outside the United States.  Kleintop suggests, “as the world economy becomes more diverse, broad exposure to many different countries makes more sense than betting on just one.”

This valuable lesson speaks to the power of global diversification.  Many investors put all of their stock exposure into domestic companies in the 60’s, 70’s and 80’s.  However, as the global markets were opened and competition increased around the world, it became more apparent that adding international stocks to portfolios provided an additional source of returns while potentially reducing risks.  Given the higher valuations and nine year anniversary of the U.S. bull market, now is as important as ever to maintain your global diversification.

Asset Index Category Category Category 5-Year 10-Year
3 Months 2018 YTD Average Average
S&P 500 Index – Large Companies -1.2% -1.2% 11.0% 7.2%
S&P 400 Index – Mid-Size Companies -1.1%  -1.1% 10.3% 9.2%
Russell 2000 Index – Small Companies -0.4% -0.4% 10.0% 8.3%
MSCI ACWI – Global (U.S. & Intl. Stocks) -1.0% -1.0% 9.2% 5.5%
MSCI EAFE Index – Developed Intl. -1.5% -1.5% 6.5% 2.7%
MSCI EM Index – Emerging Markets 1.4% 1.4% 5.0% 3.0%
Short-Term Corporate Bonds -0.3% -0.4% 1.0% 2.2%
Multi-Sector Bonds -1.5% -1.5% 1.8% 3.6%
International Government Bonds  4.7% 4.7% 1.6% 1.9%
Bloomberg Commodity Index -0.4% -0.4% -8.3% -7.7%
Dow Jones U.S. Real Estate -5.9% -5.9% 6.3% 6.3%


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment, strategy, or product or any non-investment related content, made reference to directly or indirectly in this newsletter, will be suitable for your individual situation, or prove successful. This material is distributed by PDS Planning, Inc. and is for information purposes only.  Although information has been obtained from and is based upon sources PDS Planning believes to be reliable, we do not guarantee its accuracy.  It is provided with the understanding that no fiduciary relationship exists because of this report.  Opinions expressed in this report are not necessarily the opinions of PDS Planning and are subject to change without notice.  PDS Planning assumes no liability for the interpretation or use of this report. Consultation with a qualified investment advisor is recommended prior to executing any investment strategy. No portion of this publication should be construed as legal or accounting advice.  If you are a client of PDS Planning, please remember to contact PDS Planning, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives.  All rights reserved.