Third Quarter Investment Commentary

Contributed by: Angela Palacios, CFP® Angela Palacios

After a very interesting first half of the year with early negative returns, followed by Brexit in June, markets performed well in July and then quieted down in the month of August. September brought with it a bit of increased fluctuation when investors thought the Federal Reserve Board may raise rates at the September meeting but calmed back down when that fear subsided. As of October 1st the S&P 500 gained over 7.8% this year including dividends with nearly half of that gain (3.85%) coming in the third quarter. The year-to-date story, however, has not been told primarily by the S&P 500 as we have gotten so used to over the past several years. 

Diversification Works Again

This year other asset classes have had the opportunity to shine as Emerging markets; commodities and high yield have topped S&P 500 returns. Diversification seems to once again be working after a long drought. The chart below shows performance of various asset classes by year with the best performer’s bars on the top of the stack and worst relative performers on the bottom. Notice the Green line (S&P 500) has been near the top of the list for the past three years but that hasn’t been the norm over the last 14 years. This year we have returned to the more normal pattern where the S&P doesn’t dominate.

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    Source: Blackrock

Source: Blackrock

Rate Hike Kicked Down the Road

Not surprisingly the Federal Reserve opted not to raise interest rates last month. The dissention among the voting members, though, was surprising. Three members of the voting board voted for an interest rate increase going against Janet Yellen’s recommendations to hold course. This is the first noted dissention since 2014. The next meeting occurs in November just a few short days before the election. It is highly unlikely they will make waves that close to the election so it looks likely that if a rate increase occurs it will be at the December 13-14th meeting.


I would be avoiding the elephant in the room if I didn’t mention the election. Jaclyn Jackson wrote a piece on political parties and their impact to your portfolio, I would encourage you to read this before making any rash investment decisions based on the election. The battle between Clinton and Trump is proving to fulfill every media fantasy. They both certainly make for excellent headlines. Trump will be doing his best to rally voters to change by making promises but also by making things seem worse in the economy than they likely are. While there is often some volatility leading into an election because of these negative headlines, usually after the decision has been made markets settle down and most often continue in a positive direction the remainder of the year.

Checkout Investment Pulse, by Angela Palacios, CFP®, a special summary of the Morningstar ETF conference she attended.

Harvesting tax loss may sound counter-intuitive but can go a long way to enhance net after-tax returns for investors. Find out some strategies to implement and common mistakes to avoid.

This month Nick Boguth, Investment Research Associate, gives us an introduction to cost basis methods and what we typically have our clients utilize.

Jaclyn Jackson, Investment Research Associate, explains to us how just like the right mix of ingredients for a tasty meal, we also need to know the asset allocation mix that makes our investment journey palatable.

If you have topics you would like us to cover in the future, please let us know! As always, we appreciate the opportunity to meet your financial planning and investment needs. Thank you!

Angela Palacios, CFP®
Director of Investments
Financial Advisor

Angela Palacios, CFP® is the Director of Investments at Center for Financial Planning, Inc.® Angela specializes in Investment and Macro economic research. She is a frequent contributor The Center blog.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. 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. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. 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 always involves risk, including the loss of principal, and futures trading could present additional risk based on underlying commodities investments. Diversification does not ensure a profit or guarantee against a loss. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results.