Of course, it rarely makes sense to have a portfolio that’s 100% invested in stocks, unless you are young and your tolerance for risk is high.
When markets get volatile, those who are 100% invested in equities will see the biggest declines. Simply put, other asset classes help reduce volatility and put you on a straighter path toward your goals.
The tailwinds that have driven stocks higher over the last year, and for that matter, over recent years, still remain in place.
Economic growth in the U.S. has been quite resilient this year, even in the face of devastating hurricanes.
The U.S. Bureau of Economic Analysis reported at the end of October that Gross Domestic Product (GDP) expanded at an annual pace of 3% in Q3. It’s the second-consecutive quarter of GDP growth that has met or exceeded 3%. The economy hasn’t experienced that since 2014.
But it’s not just what’s happening here at home; we’re witnessing an acceleration in economic activity all around the world.
One byproduct for investors—solid corporate profit growth. It’s a key factor in the stock market equation. Throw low inflation and low interest rates into the mix, and the S&P 500 Index set 11 new all-time closing highs in October (St. Louis Federal Reserve data).
Table 1: Key Index Returns
|MTD %||YTD %||3-year* %|
|Dow Jones Industrial Average||+4.3||+18.3||+10.4|
|S&P 500 Index||+2.2||+15.0||+8.5|
|Russell 2000 Index||+0.8||+10.7||+8.6|
|MSCI World ex-USA**||+1.3||+18.0||+2.9|
|MSCI Emerging Markets**||+3.5||+29.8||+3.3|
|Bloomberg Barclays US Aggregate Bond Index||+0.1||+3.2||+2.4|
Source: Wall Street Journal, MSCI.com, MarketWatch, Morningstar
MTD returns: September 29, 2017-October 31, 2017
YTD returns: December 30, 2016-October 31, 2017
**in US dollars
We Use Evidence-Based Investment Strategies To Build Long-Term Portfolios For Our Clients.
We have never favored market timing as an investment strategy. Hoping to sidestep the inevitable market declines and get back into stocks before the next upswing is a fool's errand. It’s simply not possible to accurately and consistently predict the future. We know this point seems obvious to most people, but it must be said.
Our investment approach has always been a time-tested strategy that is based on the weight of the evidence using historical data (fundamental and technical) that takes the inevitable bumps in the road into account.
We won’t venture a guess as to how global markets may perform next year or through the remainder of the decade, but we’ll participate in the upside and use various evidenced-based investment strategies that will help mitigate, though not eliminate, the downside.
History tells us this has been the most prudent path to wealth accumulation and achieving your long-term financial goals.
We hope you've found this monthly update to be helpful and educational. If you have any questions and would like to discuss your portfolio or other important financial matters, please give us a call at (330) 836-7000 or schedule an appointment here.
Many happy returns on life,
Jonathan Torrens CFP®
President and Chief Investment Officer
TCM Wealth Advisors
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The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.