November 2018 Financial Markets Summary

October was a brutal month for markets around the globe with concerns about global growth, escalating trade tensions, rising interest rates and the upcoming mid-term elections.  Domestic stocks faced pressure with the S&P 500 down almost -7%, the Dow Jones Industrial Average almost -5% and small cap stocks nearly -11% for the month.  International stock indexes didn’t fare much better with -8% losses.  Commodities and real estate were also both in the red with -2% and -3% losses.  Bonds and gold were about the only places to hide in October with -0.8% and 2.3% returns respectively.

One month is a short time period, but this is a great reminder to not chase the performance of recent winners.  Many investors have followed the high flying FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks.  Their performance had been stellar for the first three quarters of the year with a collective +38% gain, but Netflix and Amazon had plummeted by almost -25% at one point in October.  We urge investors to maintain their long-term diversified allocation.

Surges in volatility like this can seem daunting in the moment but are no surprise to markets in mid-term election years.  The stock markets do not like the uncertainty related to future policy, regulations and reform and typically experience much higher volatility in the months leading up to the election.  In the post-World War II era, domestic markets have averaged a +5.1% return in midterm election years with more than 80% of the gains taking place in the final two months after the election.  Who knows if the trend will continue this year, but the S&P 500 was up 1.4% year-to-date as of October 31st.

We would expect to see volatility continue in the months ahead as markets grapple with Chinese trade tensions and rising interest rates from the Federal Reserve.  We remind clients to keep their next 5-8 years of income needs from the portfolio in stable assets such as cash, CDs and short-term bonds.  Please keep in mind our time-tested belief that “today’s headlines and tomorrow’s reality are seldom the same.”

Asset Index Category Category Category 5-Year 10-Year
3 Months 2018 YTD Average Average
S&P 500 Index – Large Companies -3.7% 1.4% 9.1% 10.8%
S&P 400 Index – Mid-Size Companies -8.0% -4.0% 7.2% 12.4%
Russell 2000 Index – Small Companies -9.5% -1.6% 6.6% 10.9%
MSCI ACWI – Global (U.S. & Intl. Stocks) -6.8% -5.6% 4.0% 7.4%
MSCI EAFE Index – Developed Intl. -8.9% -9.3% 2.0% 6.6%
MSCI EM Index – Emerging Markets -11.6% -15.7% 0.8% 7.8%
Short-Term Corporate Bonds 0.5% 0.4% 1.2% 2.5%
Multi-Sector Bonds -0.8% -2.4% 1.8% 3.9%
International Government Bonds -2.6% -3.6% -0.5% 2.2%
Bloomberg Commodity Index -2.0% -4.1% -7.3% -4.2%
Dow Jones U.S. Real Estate -3.0% -0.7% 8.0% 11.3%


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.