September 2016 Financial Markets Summary

Unlike most summers, this year’s has been a good one for the markets.  Some areas have produced surprises, perhaps the biggest being the strength of Latin American stocks, up almost 18% the last three months.  Much of this came on the strength of Brazilian stocks, which gained more than 30%.  Brazil, you ask?  The country that is on the verge of collapse?  So much for the doom-and-gloomers.  In fact, Latin America is the reason emerging market stocks as a whole were the top-performing sector for the quarter.  Other surprises have been the gains in domestic small company stocks, and the continued gains in real estate stocks.  In fact, with the exception of commodities, virtually all sectors had a solid summer.

Now we enter September, the month that historically at least, is the weakest of the year.  Perhaps the experts will once again be wrong.  The usual suspects are calling for a market collapse, but understand that many of them are gold and commodity bugs, who can benefit only from market crashes.  Our own view remains about the same.  With near-record low interest rates, very benign inflation, and a very sluggish economy, we would not be surprised to see the markets hang on to their gains.  Overseas, especially in Europe, valuations are compelling.  Guild Asset Management noted that the “pundits are wrong again: Europe continues to grow post-Brexit.  This is another clear case of panic and overreaction to expert fear-mongering.”  This does not mean everything will be clear sailing ahead, given the potential for increased market volatility around our upcoming election.

It would appear the Fed is poised to raise the Fed Funds interest rate by a whopping quarter percent later this year.  The vultures are already suggesting a near end-of-world scenario.  But PDS’ Kurt Brown, as quoted in an article from U.S. News & World Report, says “Theoretically, a gradual increase in interest rates should help stocks.  Rates typically rise due to a broad-based improvement in the economy.  As the economy improves, wages also rise, which causes consumers to spend more of their discretionary income.”  Rest assured we will not see any rapid increase in rates.

All investors would love to have great returns with no risk.  Unfortunately that is not possible.  There is risk in everything.  Loss of principal in the stock market.  Loss of purchasing power with CDs and bonds.  In most cases a diversified mix of cash, bonds, and stocks may be the most prudent way to proceed.  But each investor has different short and long-term goals, different risk tolerances, and different income needs. Be sure your portfolio’s allocation matches your goals, your cash flow needs, and gives you some measure of assurance.  And remember that Today’s headlines and tomorrow’s reality are seldom the same.

Asset Index Category Category Category Category 10-Year
3 Months 2016 YTD 2015 Average
Dow Jones Industrials – Large Cos 3.5% 5.6% -2.2% 4.9%
S&P 500 Index – Large Companies 3.5% 6.2% -0.7% 5.2%
S&P 400 Index – Mid-Size Companies 4.8% 11.9% -3.7% 7.6%
Russell 2000 Index – Small Companies 7.3% 9.2% -5.7% 5.6%
MSCI EAFE Index – Developed Intl. 1.6% 0.5% -3.3% 1.7%
MSCI EM Index – Emerging Markets 11.9% 14.5% -16.4% 3.9%
Short-Term Corporate Bonds 0.9% 2.3% 0.2% 2.9%
Multi-Sector Bonds 2.3% 5.8% -2.1% 4.9%
International Government Bonds 3.9% 13.8% -3.9% 3.9%
Bloomberg Commodity Index -2.9% 5.7% -24.6% -6.2%
Dow Jones U.S. Real Estate 6.4% 12.6% 2.1% 5.6%


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.