Quarterly Update

With the third quarter of 2017 behind us, let's review some of the returns from different areas of the markets through the end of September.

The U.S. stock market continued to grind higher, with the S&P 500 rising about 4.5% during the quarter, bringing year-to-date performance to a very solid 14%. Small company stocks, which had been underperforming all year, changed course during the quarter, besting the S&P 500 with 5.7% but are still lagging year-to-date at about 11%.

Due largely to central bank activity and a weak dollar, foreign markets have been performing well this year and the third quarter was no exception. Emerging markets (China, Brazil, etc) and developed foreign markets (Europe, Japan, etc) returned 8% and 5.5%, respectively. But year-to-date, outperformance over the U.S. has been more pronounced with the same indexes returning 28% and 20%, respectively.

Unsurprisingly, the bond market continued to generate subdued returns during the quarter. U.S. core bonds (Treasurys, government agencies and high quality corporate bonds) eked up .85%, to just over 3% year-to-date. While the Federal Reserve didn't raise short-term rates during the quarter, the bond market did react to Fed statements about the potential path of interest rates and expectations for growth. This has been putting negative pressure on bond prices, but the interest paid by bonds has helped keep total returns positive.

More aggressive portfolios with extra exposure to stocks have obviously benefitted this year. This can be challenging for conservative investors who lean on bonds for stability. While it's impossible to tell how much longer the stock market can continue to rise before we see another meaningful pullback, it will come eventually. As we're all aware, trying to "time" the markets or chase performance is a fool's errand. Instead, trust your long-term plan and portfolio allocation, even though it can be frustrating at times.

Here are some updates to other interesting benchmarks since the end of the second quarter:

• Oil (WTI): $52 per barrel, up from $46
• Gold: $1,283 per troy ounce, up from $1,242
• 10-yr Treasury Yield: 2.33%, barely changed from last quarter but saw a bit of volatility
• 30yr fixed rate mortgage (average): 4.11%, largely unchanged
• Prime rate: 4.25%, unchanged
• Average 6mo CD: 0.42%., also largely unchanged

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