We, at Beacon Financial Strategies, believe strongly that the most effective investment strategy is one that is developed within the context of a financial plan and customized to meet your personal risk profile and return requirements. Click here to learn more about our investment philosophy.
Research has proven time and again that it is impossible to consistently time the financial markets, by exiting before trouble arises and re-entering just before the “all clear” signal. Nevertheless, we believe it is important to stay abreast (if you like) of recent market history because understanding shorter term market movements, can give you the confidence to stick with your long term investment plan.
First Quarter 2019 Index Data
The following table should give you an idea of how the financial markets have performed over the last 3 months. While it may be interesting to look at very short term investment performance, we believe the value of this table lies in the “Best Quarter/Worst Quarter” performance information. It’s easy to see, when looking at the “Worst Quarter” row that there is a definite correlation between the amount of investment risk assumed and the magnitude of possible negative performance.
How Did the Financial Headlines Impact Stocks?
The following chart shows the movement of the MSCI All Country World Index (an index that measures stock performance globally) over the course of the last twelve months. You will note that there are also a number of the major news headlines that may have impacted stock performance.
Domestic Stock Performance
In terms of the performance of stocks, the US equity markets have provided a negative performance in the short-term, but a positive performance in the long-term.
You will note that there was wide disparity between those stocks that are considered “Growth” (normally stocks in sectors like technology, healthcare, etc.) and those that are classified as “Value” stocks (normally stocks in sectors like financials, energy, etc.). Find below, performance data for various categories of US Stocks:
International Stock Performance
In US dollar terms, developed markets outside the US under-performed the US but outperformed emerging markets during the second quarter. Value under-performed growth in non-US developed markets across large and small cap stocks and small caps under-performed large caps in non-US developed markets.
Fixed Income (Bond Performance)
Interest rates decreased in the US Treasury fixed income market during the first quarter. The yield on the 5-year Treasury note declined 28 basis points (bps), ending at 2.23%. The yield on the 10-year Treasury note decreased 28 bps to 2.41%. The 30-year Treasury bond yield fell 21 bps to finish at 2.81%.
On the short end of the curve, the 1-month T-bill yield was relatively unchanged at 2.43%, while the 1-year T-bill yield dipped 23 bps to 2.40%. The 2-year Treasury note finished at 2.27% after a 21 bps decrease.
In terms of total returns, short-term corporate bonds gained 1.83%. Intermediate-term corporate bonds had a total return of 3.82%. Total returns for short-term municipal bonds were 1.33%, while intermediate munis gained 2.78%. Revenue bonds outperformed general obligation bonds