Market Pulse – Third Quarter 2016

In Asset Allocation, Bonds, Investments, Market Review, The Economy by Chip Hymiller

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.

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.

12-month-headlines

Domestic Stock Performance

In terms of the performance of stocks, the US equity markets provided positive performance in both the short and long term.  Find below, performance data for various categories of US Stocks:us-stock-performance-as-of-9-30-16

Domestic Stock Index Data: Large Cap (S&P 500 Index), Large Cap Value (Russell 1000 Value Index), Large Cap Growth (Russell 1000 Growth Index), Small Cap (Russell 2000 Index), Small Cap Value (Russell 2000 Value Index), and Small Cap Growth (Russell 2000 Growth Index)

International Stock Performance

In US dollar terms, developed markets outside the US outperformed the US equity market but underperformed emerging markets indices during the quarter.  Stocks of small capitalization companies outperformed their large capitalization counterparts in non-US developed markets.

foreign-stock-performance-as-of-9-30-16International Return Data:  Large Cap (MSCI World ex USA Index), Small Cap (MSCI World ex USA Small Cap Index), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USA Growth).

Fixed Income (Bond) Performance

Although still painfully low, interest rates across the US fixed income markets generally increased in the third quarter. The yield on the 5-year Treasury note rose 13 basis points (bps) to 1.14%. The yield on the 10-year Treasury note rose 11 bps to 1.60%. The 30-year Treasury bond increased 2 bps to finish with a yield of 2.32%.

The 1-year Treasury bill yield rose 14 basis points to 0.59%, and the 2-year Treasury note yield increased 19 basis points to 0.77%. The yield on the 3-month Treasury bill rose slightly by only 3 basis points to 0.29%, while the 6-month Treasury bill was up 9 basis points to 0.45%.  Below is a summary of the fixed income market.

q3-fixed-income-statistics