Market Update - Quarter 3 2017

By: David Smyth, September 28, 2017

I can't believe this week marks 3/4 of the way through the year. It's amazing how time really does fly by, doesn't it? Since our last market update, there hasn't been a whole lot of change, other than our favorite North Korean dictator earning the nickname of Rocket Man, and our president confusing freedom of speech and patriotism. And, places like Puerto Rico that basically don't exist anymore are getting ignored because they're not Houston or South Florida, and economically, they don't mean as much to our country. That could be analogous to the general attitude right now, actually. 
 
But, around here, we're not letting any of that affect us as we are happily prepping for what we know will be a very busy end of the year, between client meetings and all the fun events such as our Keeneland tailgate, and our annual office Christmas party, to name a couple of the things we'll be doing out and about with you. 
 
In the office, we're in the process of welcoming two new operations/planning interns, and we expect both of them to add to the overall services we can provide, while they learn our business and industry. I tell all of my interns (and I've been hiring them for 16 years!) that internships have two purposes - first, to give you an idea of what you might like to do, and second, to get an idea of what you don't like to do! If we can help these kids narrow down the scope of what they want to do in life before they graduate, they'll just be that much more successful. 
 
Additionally, we're going into our fourth quarter/end of year meetings with all of you, so let this be a GENTLE REMINDER to do your homework before your next meeting. Or, be prepared to tell us why you haven't taken action. They don't all go like this, but we've been especially proud of this year's investment advice and recommendations, and the job we've done. We look forward to helping each and every one of you finish the year strong. 
 
Now you're thinking, "Okay Dave, you said this was a market update." Oh yeah. Right. As I mentioned, there's really nothing significantly new since our last market update. Yes, the summer was not a great earnings season, but nothing that's going to send the economy into a tailspin. 
 
But, we are getting to the time of year when companies are engaging the analysts, and management is telling their stories to investors. Within 90 days of 2018, analysts start to forget about 2017, and start to issue reports on how they think companies will perform during the 12 months of 2018. The thing to understand about this process is that no company ever says they think they're going to have a bad year. Everyone is an optimist for 2018 right now. 
 
There will have to be some separating the wheat from the shaft over the next six months, but sometimes the equity markets, after taking a breather in September and October, will rebound with a vengeance as investors feel there will be more good news in 2018 than there was in 2017. 
 
Within the markets over the last 10 days, we've seen a subtle rotation out of some of the winning stocks of 2017 and into some traditional blue chip stocks. We view this not as a top in the market, but as investment managers (think pensions and mutual funds) wanting to lock in some of their gains, as many companies report their holdings as of September 30. 
 
We view rotations like this as times to actually buy. We've had several since the start of June, as the market has been effectively range-bound. Every rotation into technology has been met with a rotation out of technology. We see this as healthy, as shares are being sold to new shareholders, not to hold them for 90 days, but rather because they think 2018 and 2019 will be better years. 
 
Crude oil bottomed at $43 per barrel in late June, and has been on a steady climb since. While nowhere near its highs, at $52 per barrel currently, it is double the $26 per barrel it was at in February of 2016, when we told you to buy. Those who did are happy. 
 
The only other market area we're watching is the small cap index, the Russell 2000, which has been resting since December 2016, but recently broke out to new highs. While small caps have underperformed their large cap brethren for the year, we wouldn't be surprised to see a continued rotation into small and mid cap stocks over the next three to 36 months. And lastly, we have the Europe stock market making a three-year high, which is a good thing not only for international investments, but for the US as well. Europe is an important trade partner. 
 
I could keep going, but I don't want to bore you. I know you have a zillion other exciting things in your life that you're looking forward to this weekend. But, whether you're a current client, or you're thinking about becoming a client, I'm more than happy to let you pick my brain - or anyone else's on our team. Our focus is financial planning, but all of the advisors here are highly competitive and we love to talk about the equity and debt markets. We'd love to sit down and talk about these and other opportunities with you, as they fit your risk tolerance. 

Family Financial Partners | Growing Wealth, For Generations ™