U.S. & International Economics:
- Global economies are still experiencing very slow growth.
- U.S. employment remains robust with unemployment at a relatively low level of 5.0%.
- Bond yields have increased in anticipation of the Federal Reserve raising interest rates (bond prices move inversely to yields).
- Fears of a Chinese slowdown have subsided for now with renewed confidence that their government will continue to prevent a hard-economic landing.
- Japan continues to provide stimulus which should result in increased growth.
- Technology and U.S. Small Cap stocks provided the best returns over the third quarter.
- Utilities and Precious Metal equities took a breather after substantial increases in the prior quarter.
- Energy stocks have rebounded after a big drop in oil prices earlier this year.
- Healthcare stocks lagged over speculation that more regulatory hurdles are anticipated.
- Foreign bonds did well as international interest rates had downward pressure.
- For some perspective on the election read the following article: Investors Should Stay The Course During Election, Planners Say
- The only other factor of note is the Federal Reserve’s policy toward increasing interest rates.
What Happens Next:
- Domestically, there is little indication of a recession in the near future. Bull markets don’t die of optimism; they usually die of euphoria. There is no current evidence of euphoria. If anything, we just have a ping pong match between optimism and pessimism.
- Opportunities in the international markets are becoming more interesting with currencies stable and valuations attractive.
- Brexit negotiations are now beginning and should provide the markets with clarity in Europe.
- While increased rates are a given, the pace is expected to be slower than previously thought.
We recognize there is a daily diet of news on the pending elections next month. It is our opinion that political changes in the presidential and congressional offices ultimately will have little long-term effects on the global economy. Ultimately, the more important focus is the overall direction of growth in the economy, both domestic and abroad. With that said, the global economies have slow growth and this should bode well for continued increase in the stock markets of the world. There is little chance of an economic recession, and as a result, we continue to maintain a bullish stance moving forward.
Please let us know if you have any questions on the overall strategy and holdings in your personal portfolio. We are always happy to chat about your individual financial situation. As always, we greatly appreciate the confidence you have shown in our services. Thank you for your business! On a separate note, we are pleased to announce that we are reopening our South Bay office which is adjacent to the San Jose Airport. We expect this satellite office to be up and running by early 2017. We will keep you updated as to when the office will be available for meetings.
Bijan Golkar, CFP®
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