October was another strong month for markets around the world with the S&P 500, developed international and emerging markets all up over 4%.  This now brings large cap domestic stocks up +21.1%, developed international +16.8% and emerging markets +10.4% for the year.  Technology and real estate continued to lead the way in the U.S., while energy was the lone sector with negative returns.  Gold also rallied by +18.1% this year as investors started to raise concerns about global growth, trade tensions and potential impeachment hearings.  We would expect to see a continued increase in volatility due to these risks in the coming months.

2019 has certainly been a strong year, but we have seen a real divide between the manufacturing segment and the consumer/services side of the economy. Charles Schwab’s Liz Ann Sonders recently wrote that ”manufacturing’s beleaguered state persists alongside weak business investment – courtesy of ongoing uncertainty with regard to trade and tariffs.  On the other hand, the services side of the economy remains in expansion mode, while consumer spending and confidence remain healthy.”  Fortunately consumer spending accounts for nearly 70% of the U.S. GDP to help continue the expansion.

JPMorgan’s Chief Global Strategist, Dr. David Kelly has characterized this unique economic expansion over the years as being a “healthy tortoise with a pedestrian 2% growth rate.  After the 2017 tax act was passed, the tortoise sped up.  The economy accelerated as the tax act led to stronger investment spending and consumer spending, almost like the tortoise put on a pair of running shoes for a while.”  The most recent GDP report would suggest that “we have now come full circle with the tortoise slowing down again and replacing his running shoes with a pair of slippers.  We don’t think the economy is heading into a recession, but it has certainly slowed down.”

Given the slowing economy, especially in the manufacturing segment, 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.

 

Asset Index Category

Category Category 5-Year 10-Year
3 Months 2019 YTD Average Average
S&P 500 Index – Large Companies 1.9%  21.1% 8.6% 11.3%
S&P 400 Index – Mid-Size Companies -0.6% 17.6% 7.1% 11.5%
Russell 2000 Index – Small Companies -0.8% 15.9% 6.7% 10.7%
MSCI ACWI – Global (U.S. & Intl. Stocks) 2.2% 18.9% 7.0% 8.9%
MSCI EAFE Index – Developed Intl. 3.8% 16.8% 3.3% 5.4%
MSCI EM Index – Emerging Markets 1.0% 10.3% 2.3% 3.8%
Short-Term Corporate Bonds 0.8% 4.4% 1.8% 2.2%
Multi-Sector Bonds 2.3% 8.8% 3.4% 3.7%
International Government Bonds  1.4% 5.8% 1.4% 1.3%
Bloomberg Commodity Index 0.8% 5.2% -7.2% -4.4%
Dow Jones U.S. Real Estate  6.3% 29.0% 10.7%

13.5%

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.