May 2015 Financial Markets Summary

I’ll be honest; I haven’t heard much clamor about the new Apple Watch.  I’m not sure I’ve even heard it mentioned in any passing.  Number one reason: watches aren’t actually used anymore.  They are fashion accessories, and Apple Watch isn’t cute.  And no one wants to spend that kind of money on a watch when they already have a phone.”  This commentary by a financial writer’s son might say a lot about the currently underwhelming demand for the new Apple Watch.  According to Slice Research, Apple (APPL) sold roughly one million watches on the first day at an average price of $503 per watch.  As one market watcher noted, that’s a whopper of a thud, especially considering the Watch was offered over the internet instead of making people physically wait in line like the iPhone and iPad.  Perhaps stock watchers know something, since Apple’s stock has gone nowhere in the last two months.

Does this mean consumers are becoming less willing to shell out big bucks for the latest technology, or is it just that the Watch is a) a dud that will never catch on, or b) a gadget that will take time to gain popularity?  One thing for sure, it is not a “must have” item based on current sales.  With Apple now a big part of both the S&P 500 and the Dow Jones Industrial Average, a stagnant Apple brings opportunity to mid cap, small cap and international stocks.  The numbers at the bottom of the page reveal the divergence from last year’s run-away performance by the S&P 500.

International stocks have been a surprise for some, since retail investors dumped them at the end of 2014 to buy large cap U.S. stocks.  While things do not always revert to the mean quite as fast as this, investors need no better reminder of the importance of diversification.  While it might disappoint in any given year (like 2014), the longer-term numbers are usually very revealing, as evidenced from the 10-year numbers below.

It can be daunting to be an investor in today’s volatile world.  Noted global economist Ian Bremmer notes “there are always winners and losers.  The current environment is both unstable and dangerous.  But it has always been that way around the world.”  The big themes, as he sees them are “1) the inevitable, ongoing rise of China, both economically and politically, 2) the continued lack of stability in the Middle East, and 3) the conundrum of Russia.“  Other worries include European disunity and American indifference to global politics.  But despite all of this, international markets have provided by far the best returns of any asset class this year.  As we have so often heard, fear can kill investment decisions.

The numbers below reflect the above points and emphasize once again the value of diversification and the value of patience.  As always, we remind investors to protect the money you might need to take from your portfolio over the next 3-5 years by keeping it in cash, CDs, or short-maturity bonds.  And remember that today’s headlines and tomorrow’s reality are seldom the same. This is something to keep in mind as you are scared by predictions of foreboding global disaster.

Asset Index Category Category Category Category 10-Year
2015 To-Date 3 Months 2014 Average
Dow Jones Industrials – Large Cos 0.1% 3.9% 7.5% 5.7%
S&P 500 Index – Large Companies 1.2% 4.5% 11.3% 6.0%
S&P 400 Index – Mid-Size Companies 3.2% 4.5% 8.2% 8.1%
Russell 2000 Index – Small Companies 1.2% 4.7% 3.5% 7.7%
MSCI EAFE Index – Developed Intl. 9.2% 8.6% -4.9% 5.6%
MSCI EM Index – Emerging Markets 9.6% 8.9% -4.6% 7.0%
Short-Term Domestic Bonds 0.9% 0.3% 1.1% 3.0%
Multi-Sector Bonds 2.0% 1.3% 5.1% 5.9%
Global Bonds 0.1% -0.2% 1.7% 4.1%
Morningstar Commodity Index 0.9% 6.2% -24.4% 0.6%
Dow Jones U.S. Real Estate -0.8% -6.1% 27.7% 7.3%
World Allocation Global stocks, bonds, commodities 3.6% 3.6% 1.5% 6.1%


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.