Many of you have been wondering what has been going on this past week causing the increased volatility we have seen in the market.
Let us give you a peek at what we and our trusted analysts see at this point.
Last quarter numbers
The S&P 500 Index was +1.1%, but smaller company stocks were -7.4%. International markets, as measured by the MSCI EAFE index, were -5.8% for the quarter and various emerging markets, depending on locality, were – 1.4% to -11.4%. All in all, it was a very tough quarter to come out ahead.
How does the economic environment look now?
Surprisingly to some, our domestic economy
is still on fairly solid footing. Employment remains reasonably strong, consumer spending is up, and housing prices are firming up. The dollar has been strengthening against the Euro, wages increased slightly and inflation is stable below the 2% long-term target of the Fed.
Why the recent volatility?
Overseas the global economic picture is not so rosy, which is the primary reason for our recent volatility. Europe is still facing stalled growth and the potential for deflation hasn’t gone away. Though China is still seeing reasonable economic growth they are struggling with economic reform. In addition to this, investors have been somewhat concerned about the geopolitical issues in the Middle East as well as somewhat high stock prices currently.
Are we expecting a downturn?
The simple answer is “not so much”. Generally, our strategists are watching closely for a buying opportunity if the market goes much lower. There is little consensus of a continuing market slide.
On the other hand, there are still some underweighting equities in our models until the environment produces a better opportunity to be fully weighted.
Have our precisely designed risk models held up?
We have been very pleased with how our models have performed. Generally your accounts were flat to very minimally down last quarter. This is just what they are designed to do – help reduce volatility in your accounts during volatile periods.
If you have any questions about your specific situation, please don’t hesitate to call.
We appreciate the great opportunity it is to work with each one of you.
Max W. Smith, CFP®, CIMA®
Kent G. Forsey, CFP®
12213 W Bell Road, Suite 209
Surprise, AZ 85378