August 2018 Financial Markets Summary

One of the most common ways investors differentiate stocks is based on their value or growth characteristics.  Value stocks, often times are priced lower than the broader market and pay dividends back to their shareholders.  Growth companies, on the other hand, are typically priced much higher, exhibit much higher earnings growth and reinvest their profits back into the business rather than paying out dividends.

We point this out this month because a wide gap currently exists between the two.  Growth stocks have outperformed their value counterparts by 12-17% over the past year.  To take an even longer-term perspective, growth has been outperforming value for almost 10 years by a whopping 45%!

We are currently in the midst of the longest time period of growth stock outperformance.  History would suggest that the pendulum can swing back in favor of value stocks in short order.  The most recent evidence of this took place in the early 2000’s as the dot-com bubble burst and the technology heavy NASDAQ index shed 78% of its value.  We urge investors to not be lured in by these strong growth returns.

Growth appears to continue charging forward led by high-flying technology stocks like the famous FAANG (Facebook, Amazon, Apple, Netflix and Google (Alphabet)).  However, we have seen early stages of trouble ahead with Facebook’s -19% ($119 billion) one day loss in late July after a disappointing earnings report.  Twitter followed up quickly thereafter with a -20% loss the following day.

We are by no means suggesting an anticipated meltdown within growth stocks, but we believe that value companies may offer a better opportunity for investors over the next few years.

Asset Index Category Category Category 5-Year 10-Year
3 Months 2018 YTD Average Average
S&P 500 Index – Large Companies 6.3% 5.3% 10.8% 8.3%
S&P 400 Index – Mid-Size Companies 6.0% 4.4% 10.0% 9.5%
Russell 2000 Index – Small Companies 8.4% 8.8% 9.8% 8.9%
MSCI ACWI – Global (U.S. & Intl. Stocks) 2.0% 1.3% 6.9% 4.2%
MSCI EAFE Index – Developed Intl. -1.1% -0.4% 5.9% 3.4%
MSCI EM Index – Emerging Markets -5.5% -4.6% 5.3% 2.9%
Short-Term Corporate Bonds 0.5% 0.1% 1.3% 2.3%
Multi-Sector Bonds 0.6% -1.6% 2.2% 3.7%
International Government Bonds -3.0% -1.0% 0.7% 1.8%
Bloomberg Commodity Index -4.2% -2.1% -7.0% -8.1%
Dow Jones U.S. Real Estate 8.5% 2.3% 8.7% 7.6%


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.