July 2017 Financial Markets Summary

At the halfway point in the year, with the exception of commodities, most asset classes have performed quite well.  International stocks have led the way with emerging markets (China, India, Brazil, etc.) increasing by almost 19% and developed markets (Europe, Canada, Japan, etc.) by almost 14%.  Domestic stocks are not far behind with 5%-9% gains.  Wouldn’t we love to repeat these numbers for the second half of the year!

The main reason for the strong returns is the “synchronized global recovery in profitability.”  Companies all over the world have spent the last several years improving their balance sheets and increasing profits.  Most international economies are in the earlier stages of their economic recovery cycles, but J.P. Morgan suggests that “although the U.S. economy is entering the later stages, we believe the risk of a recession remains low for now.”

These strong returns worldwide have interestingly coincided with very little volatility.  We would not expect this by watching the news, but U.S., European, Asian and even emerging market stocks are now realizing volatility at or very near records lows.  We remind investors not to become complacent with the lack of volatility and not to expect the first half returns to repeat themselves.  We expect volatility to creep back into the markets as economic, political, and regulatory risks arise.

The U.S. Federal Reserve continued their plan to gradually increase interest rates with another 0.25% hike at their recent meeting.  This now marks the third consecutive quarterly increase since December 2016.  This rising interest rate environment is the primary reason why we position most of our bond allocation in short-term bonds.  These tend to experience less downside risk than long-term bonds as interest rates rise.  We will continue to monitor the bond markets and interest rates and make changes when we feel they are necessary.

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 2.6%  8.2% 9.5% 4.9%
S&P 400 Index – Mid-Size Companies 1.6%  5.2% 18.7% 6.9%
Russell 2000 Index – Small Companies 2.1% 4.3% 19.4% 5.4%
MSCI ACWI – Global (U.S. & Intl. Stocks) 4.3% 11.3% 8.4% 1.9%
MSCI EAFE Index – Developed Intl. 6.1% 13.8% 1.0% 1.0%
MSCI EM Index – Emerging Markets 6.2% 18.4% 11.2% 1.9%
Short-Term Corporate Bonds 0.6% 1.2% 2.1% 2.4%
Multi-Sector Bonds 1.5% 2.3% 2.6% 4.4%
International Government Bonds 3.3% 5.5% 1.6% 3.2%
Bloomberg Commodity Index -3.0% -5.2% 11.8% -6.5%
Dow Jones U.S. Real Estate 2.6% 5.8% 7.6% 5.1%


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.