May 2017 Financial Markets Summary

More uncertainty, more growth, more record highs and more risk: the reigning market theme today seemingly is one of quantity – more of virtually everything, as recently suggested by Goldman Sachs.

“Investors in recent months have faced a blitz of new U.S. policy initiatives whose contours are largely unknown but reflect the power of populism now gripping the globe.  Voters in France and Germany will be offering their own verdicts on populism in coming months.  Meanwhile, economic growth has been advancing in the U.S. and has showed modest improvement in Japan and Europe.  We do expect one exception to the trend of “more” – returns.  We foresee modest returns from major asset classes due to valuation and political realities.”

The U.S stock market has been on a tear since the March 9, 2009 bottom, with a 315% total return for the S&P 500.  International stocks only experienced a fraction of this, with developed market countries (Europe, Japan, Canada, etc.) up about 150% and emerging market countries (China, India, Brazil, etc.) up about 120%.  This bull market in the U.S. could certainly continue, but we believe it is crucial to maintain international exposure given the current market valuations.  We would expect higher future returns from international stocks, but higher returns undoubtedly come with higher risk.  This trend may have recently begun, with emerging markets leading the way with a 14% return year-to-date and developed markets not far behind at 10%.

Even though interest rates are rising, we believe bonds have a significant role in client portfolios.  Given stock market valuations, potential volatility, and the rise in populism around the world, bonds provide the diversification portfolios need.

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  4.6% 6.5% 9.5% 4.9%
S&P 400 Index – Mid-Size Companies 2.7% 4.4% 18.7% 7.1%
Russell 2000 Index – Small Companies 2.8% 3.2% 19.4% 5.6%
MSCI ACWI – Global (U.S. & Intl. Stocks) 5.6% 8.5% 8.4% 3.7%
MSCI EAFE Index – Developed Intl. 6.9% 10.0% 1.0% 1.0%
MSCI EM Index – Emerging Markets 7.0% 13.9% 11.2% 2.5%
Short-Term Corporate Bonds 0.7% 0.9% 2.1% 2.4%
Multi-Sector Bonds 1.4% 1.6% 2.6% 4.3%
International Government Bonds 2.3% 3.8% 1.6% 2.8%
Bloomberg Commodity Index -3.9% -3.8% 11.8% -6.5%
Dow Jones U.S. Real Estate 3.6% 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.