June 2017 Financial Markets Summary

PDS Planning has always been a strong advocate of global diversification.  Some investors and economists began to question this philosophy when U.S. stocks outperformed virtually everything from 2013-2016.  Some even argued that you get global diversification with U.S. stocks, since their revenues are generated all over the world.  Coca-Cola, for example, is a large multi-national business based here in the U.S., but only generates about 40% of their revenue in the states.  Yes, Coca-Cola is certainly interconnected with consumers all around the world, but companies tend to act in ways that reflect their country of domicile.  They tend to respond to local economic and geo-political events more than events outside their borders.

We would argue that it is now more important than ever to remain globally diversified.  U.S. stock market valuations are continuing to become more expensive as we enter the 96th month of this bull market, while better value might be expected overseas.  We are perhaps seeing the start of a trend as shown in the year-to-date returns below.  Emerging markets have increased by over 17% and developed international markets by over 14% just in the last five months.  Do not abandon your international stocks by looking at the three and five-year returns.

Stocks have fared very well so far this year while oil (-15.1%) and commodities (-5.0%) have struggled to maintain their values.  Bonds continue to chug along, even in this increasing interest rate environment.  We believe global diversification is crucial for clients’ equity allocation, but the diversification between equities and bonds is paramount for achieving long-term success with less volatility.

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 2.0% 7.7% 9.5% 4.6%
S&P 400 Index – Mid-Size Companies -0.4% 3.7% 18.7% 6.5%
Russell 2000 Index – Small Companies -1.9% 1.0% 19.4% 4.9%
MSCI ACWI – Global (U.S. & Intl. Stocks) 4.3% 9.9% 8.4% 1.4%
MSCI EAFE Index – Developed Intl. 9.2% 14.0% 1.0% 1.1%
MSCI EM Index – Emerging Markets 7.9% 17.2% 11.2% 2.3%
Short-Term Corporate Bonds 0.7% 1.2% 2.1% 2.5%
Multi-Sector Bonds 1.5% 2.3% 2.6% 4.4%
International Government Bonds 3.9% 5.9% 1.6% 3.2%
Bloomberg Commodity Index -5.4% -5.0% 11.8% -6.6%
Dow Jones U.S. Real Estate -0.9% 3.8% 7.6% 4.0%


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.