August 2017 Financial Markets Summary

Whether you know the story as Chicken Little or Henny Penny, the plot is the same.  A chick believes the sky is falling when an acorn falls on its head and decides to tell the king.  On its journey, the chick meets other animals who believe the panicked chick and join the quest.  The moral of the story is to make fun of paranoia and mass hysteria that says disaster is imminent and to encourage us not to be a Chicken Little but to have courage.  With the extreme partisanship in Washington and the absurd market commentaries on cable news, it is easy to understand why investors might be tempted to think the sky is falling and that a market crash is imminent.  While we believe that the domestic stock market is overdue for a correction, leading economic indicators do not foretell any impending doom.  The sky is not falling.

The sky may not be falling on domestic stocks, but commodities have been rained on most of the last decade.  Commodities have fallen over 60% from their 2008 peak and have experienced negative returns in five of the last six years.  Much of this is due to the plummet of the oil and grain markets.

Commodities have been the bottom dwellers for many years, but this does not mean they will continue to struggle.  Asset classes routinely move from the worst performers to the best and vice versa.  The most recent example is emerging market stocks, which had three straight years of negative returns, followed by a 45% gain over the last 18 months.  The lesson is to maintain your diversified allocation and not attempt to chase the most recent winners or losers.

International stocks continue to lead the way this year with 17%-25% gains.  Their more attractive valuations, recent bounce in earnings, and weakening of the U.S. dollar help provide a sense of optimism for this asset class.

2017 has certainly been a reminder that today’s headlines and tomorrow’s reality are seldom the same.

Asset Index Category Category Category Category 10-Year
3 Months 2017 YTD 2016 Average
S&P 500 Index – Large Companies 3.6% 10.3% 9.5% 5.4%
S&P 400 Index – Mid-Size Companies 1.6% 6.0% 18.7% 7.5%
Russell 2000 Index – Small Companies 1.8% 5.0% 19.4% 6.3%
MSCI ACWI – Global (U.S. & Intl. Stocks) 4.9% 13.2% 8.4% 2.0%
MSCI EAFE Index – Developed Intl. 6.5% 17.1% 1.0% 1.5%
MSCI EM Index – Emerging Markets 10.1% 25.5% 11.2% 2.0%
Short-Term Corporate Bonds 0.6% 1.5% 2.1% 2.5%
Multi-Sector Bonds 1.1% 2.7% 2.6% 4.4%
International Government Bonds 4.3% 8.2% 1.6% 3.2%
Bloomberg Commodity Index 0.7% -3.1% 11.8% -6.5%
Dow Jones U.S. Real Estate 3.2% 7.2% 7.6% 6.2%


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.