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3rd Quarter 2017 Capital Market Review
Last Updated: October 18, 2017
The third quarter of the year was more of the same for equity markets. Between three hurricanes, gridlock over health care and tax reforms in Washington, interest rate increases, threats of nuclear war with North Korea, rising tension with Russia, a horrific domestic shooting, widespread social unrest, the looming Federal Reserve balance sheet tapering, and general tightening by Central Banks around the world, the markets did not slow down. Consumer optimism is reaching all-time highs, inflation is stubbornly low (confounding the Fed), wages are ticking up, and the job market remains tight with unemployment hovering near all-time lows.
Housing continues to be in short supply; however prices may have plateaued in several markets, and recent news suggests that buyers are coming back into the market after sales slipped during the third quarter. Consumer credit card debt hit an all-time high, now over a trillion dollars, but yet the markets do not seem to reflect a worried sentiment. The VIX, a popular index that gauges investor fear, remains at all-time lows, and the traditional safe haven of gold continues to be range-bound. These factors suggest that investors lack fear going into the fourth quarter.
Meanwhile, cryptocurrencies, such as Bitcoin, have surged to unprecedented values, even after continued Chinese and Russian repressions on exchanges. This has limited the viability of the currencies in those countries and has been met with negative comments from prominent bankers and economists throughout the quarter.
Fund managers that Pension Consultants have interviewed continue to be bullish on the global economy at large, but collectively seem very weary of the valuations of US securities. Foreign markets have been attracting inflows from investors, and have posted impressive gains as they continue to outperform broad US-based indexes.
There are reasons to not be complacent in portfolios and to stay diversified. The market seems to be shrugging off many risk factors, including elevated leverage from governments and corporate interest rates increase threats. Market signs indicate that we are currently moving into a low-growth environment. There are also warning signs flashing from several risk metrics should we enter this low-growth environment, or Central Banks around the globe quickly move into tightening mode.
If recent market volatility has caused you to question your current asset allocations, our Investment Services Team can help. To learn more, contact Pension Consultants Investment Consultants at 800-234-9584 or email investmentservices@pension-consultants.com.
Source: Index Returns as of 9/30/2017, Morningstar.com
Disclosure: Past performance is not indicative of future results.
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