Quarterly Commentary – July 2017
This song just continues to have the same tune, even with each successive verse. For the quarter US stocks again rose with the Standard & Poors 500 Index gaining 4.02%. This on the heels of a positive 1st quarter of this year so the Index for the first six months of 2017 has risen 10.11%. Quite the gain for a year let alone six months. Can this continue? Maybe yes, maybe no. Depends on what time frame you examine.
On a shorter term, i.e., for the next 12 months we think this steady uptick has at some point need to be interrupted. Not because we do not believe in the future growth of the stock markets but merely from the belief that history is a good teacher or future events and historic returns tell us that a correction could be in the relative near term future. So what is a “correction”? This is typically defined as a decline of between 10-20% of the stock market value from its high to the low point. (A drop of more than 20% is referred to as a Bear Market).
In a report issued by the Capital Group (American Funds) they report that market declines of 10-20% occur once every 2 years. The last corrections of this magnitude occurred in the 3rd quarter of 2015 and again in the first 6 weeks of 2016. In both cases the stock markets had precipitous declines followed by increase in prices and recovery. So here we stand June 20017 and we have not seen meaningful correction of stock prices for the past 15 months and even that six week dip of early 2016 was quickly corrected. We are not forecasting any type of impending doom. Just being realistic enough to recognize that markets go up and down as a natural occurrence of events. Try not and panic when a downturn occurs. Turn off the talking heads on television and all of their analysis and let the markets move in their natural course. In our experience that is what works in order to help you achieve your financial goals.
Past performance does not indicate future results. This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed by Kestra Advisory Services, LLC. as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. The S&P 500 is comprised of 500 stocks representing major U.S. industrial sectors and is considered representative of the market as a whole. Performance figures are inclusive of dividends reinvested. Investors cannot invest directly in an index. Standard & Poor’s Index data can be found at http://www.standardandpoors.com/home/en/us. MSCI EFA is an unmanaged Index of foreign larger companies with headquarters outside of the United States. Dow Jones Industrial Average monitors the performance of 30 large companies located in the United States.