August 2019 Financial Markets Summary

It’s hard to believe that August is here already!  The kids will be going back to school and football season is just around the corner.  The football buzz this summer seemed to be all about the Cleveland Browns and their offseason changes.  This lit a fire under the fan base (me included) where expectations went from the normal bottom dwellers to winning the division and something even as crazy as winning the Super Bowl.  My concern lies with the lofty expectations that will be difficult, if not impossible, to achieve.

This same concern directly applies to stock markets where investors have become lax during this ten year bull market.  As shown below, the S&P 500 is up nearly 19% year-to-date with an 11.7% 10-year annualized return.  If you are expecting these returns to continue at the same pace, you will likely be disappointed in the years to come.  Vanguard, for example, just released their 10-year asset class return outlook.  Domestic stocks came in with a 3.5%-5.5% projection, international stocks 6.5%-8.5% and core bonds 2.0%-4.0%.  The lesson is to reduce your expectations from domestic stocks at this stage of the cycle and for the Cleveland Browns before they hit the gridiron!

On July 31st, the Federal Reserve reduced the Federal Funds rate by 0.25%, marking the first interest rate cut since 2008.  Early indications are suggesting another 0.25% cut at their September meeting.  Their rationale was due to economic concerns where the Fed cited, “implications of global developments for the economic outlook as well as muted inflation pressures.”  Much of this concern has been caused by slowing global growth and escalating trade tensions.

The trade talks in Shanghai have not resulted in a deal or significant progress.  President Trump recently announced additional tariffs on another $300 billion worth of goods from China that are scheduled to begin on September 1st.  This continues to drive uncertainty and volatility in stock markets around the world.  We hope a meaningful deal can ultimately be accomplished to level the playing field and to remove some of this uncertainty weighing on investor’s and company’s minds.

Asset Index Category Category Category
3 Months 2019 YTD Average Average
S&P 500 Index – Large Companies 1.2%  18.9% 9.1% 11.7%
S&P 400 Index – Mid-Size Companies -0.2% 18.3% 7.5% 12.1%
Russell 2000 Index – Small Companies -1.0% 16.7% 7.0% 10.9%
MSCI ACWI – Global (U.S. & Intl. Stocks) 0.3% 16.4% 6.4% 9.4%
MSCI EAFE Index – Developed Intl. -0.4% 12.6% 2.4% 5.8%
MSCI EM Index – Emerging Markets -2.7% 9.2% 1.8% 4.5%
Short-Term Corporate Bonds 1.3% 3.3% 1.6% 2.3%
Multi-Sector Bonds 3.2% 6.3% 3.0% 3.8%
International Government Bonds          3.7% 4.4% 0.4% 1.7%
Bloomberg Commodity Index -1.4% 4.3% -8.3% -4.1%
Dow Jones U.S. Real Estate 3.7% 21.3% 9.0% 14.3%



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.