Trisha shares her thoughts on the markets, either about specific events that are happening or the market in general. Please check back regularly for new content.
Third Quarter 2018
The markets giveth and the markets taketh away.
After seesawing back and forth for months the US stock market finally gained traction in the third quarter, posting solid gains across the major indexes like the S&P 500 and Dow Jones Industrial Average. At the same time fixed income struggled as positive economic news continued to lead investors to expect higher interest rates – which in turn resulted in the expected higher rates materializing. International markets of developed countries broadly managed some gains, but emerging markets, which are often more directly impacted by rising commodity prices, the value of the dollar and global trade tensions, fell slightly. All in all it was a quarter where US stocks outperformed most other asset classes and posted attractive returns.
And then October arrived and things changed.
The US stock market gave back most of its third quarter gains during the first couple of weeks of October, with the S&P 500 crossing back below its 200 day moving average. We have been expecting volatility to pick up so were not surprised to see stocks pull back. In fact, we would not be surprised to see the broad US stock market decline another few percent to reach a full correction (a decline of at least 10%).
As long term investors we expect volatility and always have a long term outlook. In fact we used the pull back in stock prices to selectively invest some cash for clients and we continue to be constructive about stocks. That being said, diversification is important, especially when volatility rises. Over the course of the year we have tactically reduced our stock allocation in client portfolios and increased cash in accounts which take distributions. Going forward we intend to remain in this slightly cautious position, though we are mindful that stock market corrections are normal and not something that should cause us to alter our long term investment strategies.
Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties which are difficult to predict. Past performance is not indicative of future results. All indices are unmanaged and investors cannot invest directly in an index. Diversification does not ensure against market risk.
Trisha Arndt, CFP®, is president of Wealth Strategies of Wisconsin Ltd, 901 Kimball Lane, Suite 1400, Verona, WI 53593, 608-848-2400. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.