March 2017 Financial Markets Summary

Last month we noted the average 2017 year-end target for the S&P 500, as predicted by 16 major investment banks, is 2353. Expectations were, on average, very tame.  As we write this letter today, the index is at 2400…so much for expert predictions.  And who thought we would have double-digit gains in the four months since the elections?  Yes, we realize a lot can and probably will happen between now and December 31.  But this should be a reminder that relying on the experts to determine your investment strategy from year to year is mostly wasted time.

Electronic media is full of scary predictions.  This morning, I received an email telling me Dow will plummet to 6,000 amid financial collapse.  Really?  A quick click showed me someone was selling an expensive newsletter with 10 secrets to avoid the coming catastrophe.  Just 10, not 11 or 12?

The chart below tells us that, despite all the negative news about Europe and the emerging market economies, those regions have had a very strong three months.  The low returns for the bond indexes reflect the expectation that interest rates will continue to move higher. The range of numbers in the chart, from short to long time periods, should remind investors there is risk in every kind of investment.  Maybe it is loss of principal, or inflation risk, or risk specific to a sector, or risk related to the movement of interest rates, or political/economic risk, just to name a few.  Deciding what risks we want to accept, as well as those we don’t, is part of establishing an asset allocation that allows up to sleep at night.  As we said last month, managing risk and controlling expenses are things we can do something about, and that is where we focus a lot of our time.

2017 has already seen a lot of changes to global economies, the employment outlook in the U.S., prospects for higher inflation as wages continue to creep higher, and specific sectors of stocks some believe will benefit from the new administration’s economic targets.  More change: a marketing piece from a large investment firm this week said China’s unexpected rebound bodes well for investors.  Should we load up on infrastructure and China stocks? Our quick answer is no. Moving in and out of stocks and bonds or specific sectors of stocks and bonds in anticipation of, or reaction to changes in the world, is most often wasted time. We have found that a globally-diversified mix of stocks and bonds that match each client’s time horizon, tolerance for risk and volatility, and need for portfolio income is a much more prudent strategy.

2017 is certainly 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 7.5% 5.6% 9.5% 5.3%
S&P 400 Index – Mid-Size Companies 6.3% 4.1% 18.7% 7.5%
Russell 2000 Index – Small Companies 4.9% 2.2% 19.4% 5.7%
MSCI ACWI – Global (U.S. & Intl. Stocks) 7.5% 5.4% 5.6% 1.8%
MSCI EAFE Index – Developed Intl. 7.9% 4.4% 1.0% 1.0%
MSCI EM Index – Emerging Markets 8.9% 8.7% 11.2% 2.9%
Short-Term Corporate Bonds 0.7% 0.5% 2.1% 2.5%
Multi-Sector Bonds -2.0% 0.2% 2.6% 4.4%
International Government Bonds 0.8% 1.9% 1.6% 2.7%
Bloomberg Commodity Index 3.3% 0.1% 11.8% -5.6%
Dow Jones U.S. Real Estate 9.0% 4.6% 7.6% 3.8%


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.