Benchmark Returns for the Period Ended September 2016
| Annualized | ||||
|---|---|---|---|---|
| Quarter | 1 Year | 5 Year | 10 Year | |
| US Treasury Bills (one month) | 0.06% | 0.16% | 0.05% | 0.79% |
| Barclays Capital US Gov’t/Credit Inter Bond | 0.16% | 3.52% | 2.45% | 4.17% |
| Standard & Poor’s 500 | 3.85% | 15.43% | 16.37% | 7.24% |
| Russell 1000 Value (large cap value) | 3.48% | 16.20% | 16.15% | 5.85% |
| Russell 2000 (small cap) | 9.05% | 15.47% | 15.82% | 7.07% |
| Morgan Stanley Europe, Australia and Far East (EAFE) | 6.43% | 6.52% | 7.39% | 1.82% |
| Wilshire REIT | -1.21% | 17.94% | 15.82% | 5.93% |
| Source for returns: Dimensional Fund Advisors and Morningstar TM as of 9/30/2016. | ||||
Quarterly Commentary
After several quarters of mixed returns between domestic and international markets, the third quarter provided positive gains in nearly all asset classes. Small cap stocks, as represented by the Russell 2000, were the strongest domestic performers, and posted a gain of 9.05%. The Dow and S&P 500 experienced modest growth with returns of 2.78% and 3.85%, respectively. After four quarters of positive returns, REITs proved to be the only negatively performing asset class, with the Wilshire REIT moving -1.21%.
International equity markets showed continued fortitude with strong gains. Emerging markets added a quarterly return of 8.32% to its year-to-date gains, reversing the poor performance of 2015. Other international stocks, as represented by the EAFE index, climbed into positive territory for the first time this year, posting a positive gain of 6.43%.
The Fed pushed back plans to raise interest rates for a sixth consecutive meeting. A year ago the Fed was expected to increase rates each quarter in 2016, but has held rates steady since December 2015. They indicated that the economy has grown a bit stronger after weak results in the spring so the argument for raising interest rates is more convincing. The labor market improved with an unemployment rate of 5.0%, just over half of what it was seven years ago. Economic activity picked up from its modest pace during the first half of the year. Inflation continued to run below the 2% target, but all indications point to rate hikes, perhaps as early as December.
One would think that the election would add yet another layer of uncertainty in investing. However, history suggests that who is elected president, and from which party, has less impact on markets than is often assumed. Regardless of party, the markets have traditionally improved during an election year. Eighteen of the 22 election years since 1928 have yielded positive returns with an average annual S&P 500 return of 7.0%, similar to 7.5% for all years. In other words, presidential election years have been pretty average.
A philosophy worthy of your vote is one that promotes variables you can control: sticking to an appropriate long-term asset allocation, minimizing investment costs, disciplined rebalancing, and tax-efficient investment management.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. The index returns above assume reinvestment of all distributions. This information is for educational purposes only and should not be considered investment advice or an offer of any security for sale.
