Contributed by: Angela Palacios, CFP®
As we find ourselves coming into the last quarter of 2015, already we have much to reflect upon from headlines throughout the year. The GOP candidate race is heating up and the election battle will be in full swing over the next 12 months. Negative global news is spilling over into market performance, leaving investors wondering what to do.
All Fed all the time
In September, the Federal Reserve Board (Fed) held off raising interest rates, contrary to what many experts anticipated. This was likely due to reservations about confirming investor fears regarding the strength of the overall global economy in the wake of China’s slowdown. Markets sold off after this with the spillover of these concerns. Later in September Janet Yellen spoke and confirmed The Fed does intend to raise rates before the end of the year but the recent softening in nonfarm payrolls puts that in doubt. They will be watching the labor market, inflation and financial stability factors very closely.
Risk from abroad
China’s decelerating growth continues to throw a wrench in the strength of the overall global economy. As China’s economy worsens, the Chinese stock market is taking one on the chin this year. Commodities continue their sell off along with emerging markets that depend upon commodities for their livelihoods as a result of China’s slowdown. Softening of global growth could potentially negatively impact returns overseas even as accommodative monetary policy and low oil prices have a positive impact.
Back here at home
Above average equity valuations remain a strong headwind for equity market performance domestically. Shrinking earnings over the past couple of quarters have led price-to-earnings ratios of companies to expand even while prices fall. The strong dollar is having an impact on this, making our exports more expensive to consumers outside of the United States. This is causing a hit to business investment as the strong dollar is directly affecting corporate profits of large multinationals.
A bright spot in the economy
Heightened volatility will likely continue in markets over the coming months. However, strength in our GDP growth has drastically recovered after a slow first quarter of the year due to weather disruptions. Consumer spending is finally picking up, spurred by low gas prices and the strength of the housing and new construction market through the summer. Job growth remains strong, led by small and medium-sized firms, and initial unemployment claims are near lows.
Here is some additional information we want to share with you this quarter:
- Checkout my quarterly Investment Pulse, summarizing some of the research done over the past quarter by our Investment Department.
- We are launching a new quarterly series of investor education!
- Lastly checkout our Year-end checklist from Jaclyn Jackson, Research Associate, giving you tips on how to make the most of the few months left in this year!
While all of this noise can create market volatility, it is more important than ever to keep your long-term goals in mind. We do not generate future forecasts, rather we trust in the journey of financial planning and a disciplined investment strategy to get us through the tougher times and stay the course. We appreciate the continued trust you place in us and look forward to serving your needs in the future.
Please don’t hesitate to reach out to us for any questions or conversations!
On behalf of everyone here at The Center,
Angela Palacios, CFP®
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Angela Palacios and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in well-established foreign markets. Investing involves risk and investors may incur a profit or a loss. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.