Young Research & Publishing Inc.

Investment Research Since 1978

Compensation was paid to utilize rankings. Click here to read full disclosure.

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Retirement Compounders®
  • Free Email Signup

How did Markets Perform in the Third Quarter?

October 3, 2018 By Jeremy Jones, CFA

For investors with a concentrated U.S. growth stock focus, the third quarter continued what has been a solid year. For veteran investors who recognize the peril of such a strategy and instead choose to take a balanced, value-conscious approach, the third quarter added modestly to what has been an OK year.

Fixed Income Markets

Fixed income markets have been a drag on balanced portfolios YTD. The Bloomberg Barclay’s U.S. Aggregate Index was flat in the third quarter and is down 1.6% YTD. We view the modest losses in U.S. bonds as a blessing in disguise. Bonds are down YTD because interest rates have risen, but today’s higher interest rates, likely mean higher fixed income returns tomorrow. While interest rates are still low by historical standards, the nightmare of zero percent interest rates has now ended. And investors who focused on short-to-intermediate-term bonds may even have positive YTD returns despite rising interest rates.

U.S. Stocks

In equity markets, the dominance of U.S. growth stocks is evident. Both large and small capitalization growth stocks are outperforming value stocks by a meaningful margin. The solid performance of growth shares is showing up in the S&P 500 whose top holdings are increasingly concentrated in FAANG stocks.

Growth’s outperformance is also apparent across S&P 500 sectors. Technology and consumer discretionary stocks are 2018’s biggest winners. And after a strong third quarter, healthcare stocks are a close third. All three sectors have a higher concentration of growth stocks than the dividend heavy consumer staples, telecom, energy, utilities, and real estate sectors.

Foreign Stocks

Global stock market indices are up YTD, but that return is being driven entirely by U.S. stocks. The MSCI All-Country World Index, Net is up 3.83% in 2018, but excluding U.S. stocks it is down 3.1%. Emerging markets have had an especially poor year, but developed foreign stock markets are also in the red.

Seasoned investors of course recognize the folly in putting too much emphasis on quarterly, YTD, or even 3-year performance numbers. It is vital to recognize that markets move in cycles. That includes growth vs. value, stocks vs. bonds, and foreign vs. domestic, among other cycles.

The long-term is where the savvy investor places his focus. Over the long-run, a globally diversified portfolio of stocks and bonds has reduced risk and generated solid returns.

This century, a 50-50 portfolio comprised of global stocks as measured by the MSCI All-Country World Index and Bonds as measured by the Bloomberg Barclay’s U.S. Aggregate index has turned $10,000 into $26,700. An investor would have earned about $1,600 more by investing in the S&P 500, but he would have had to endure two 50% plus bear markets and almost double the volatility of the balanced portfolio without selling a single share. In annualized terms, the percentage difference between the all domestic stock portfolio and the globally diversified 50-50 portfolio is only 0.30%.

We continue to favor a globally diversified balanced approach and advise you to consider the same approach.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • The Four Stocks Propping up Global Equity Markets
  • Automation is Making Markets more Volatile
  • Are You Investing in the Armored Truck of Financial Markets?
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. CNBC has ranked Richard C. Young & Co., Ltd. as one of the Top 100 Financial Advisors in the nation (2019-2022) Disclosure. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • Money Market Assets Hit Record High: $5.4 Trillion - May 26, 2023
  • The Mania in AI Stocks Has Arrived - May 25, 2023
  • The Wisdom of Sam Zell - May 24, 2023

Search Young Research

Most Popular

  • Wellington and Wellesley Funds Not Managed by Vanguard
  • The Single Worst Market Timing Event in History
  • “No Way I’m Spending That Much on Those”
  • Should America Move Closer to the Saudis, or Push them Away?
  • The War Machine's Manpower Problem
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • The Power of a Compound Interest Table
  • Will the Fed Hold Up Its End of the Bargain?
  • “You Didn’t Eat That Again, Did You?”
  • Profits Becoming Elusive in China

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

The Importance of a Balanced Portfolio

Invest with Peace of Mind and Comfort

What Kind of Life Are You Investing For?

RSS The Latest at Richardcyoung.com

  • Bidenomics: Distrust of Public Officials and Institutions
  • Investing Habits of the Fairly Wealthy: #10 Powerball
  • “The Goal Is to Break Down the Individual”
  • Blackwater Founder Erik Prince a Hillsdale College Graduate
  • The Point to the GOP Debates
  • “The Economy Is Buried Under Trillions in Debt”
  • Will Desperate Democrats Replace Biden with Michelle or Hillary?
  • Your Survival Guy: “Life on Main Street Hasn’t Been This Hard in a While”
  • A Government of Control Freaks
  • The Elephant in the Room

RSS The Latest at Yoursurvivalguy.com

  • Investing Habits of the Fairly Wealthy: #10 Powerball
  • Your Survival Guy: “Life on Main Street Hasn’t Been This Hard in a While”
  • Your Retirement Life: Striped Bass Fishing off Block Island
  • “Then One Day the Grandfather was Gone”
  • How Joe Biden Raised Oil Prices
  • Is the Philadelphia Looting Spree the Wake-up Call America Needs?
  • “No Way I’m Spending That Much on Those”
  • What Trade Policy Serves America’s National Interest Best?
  • California Wants to Make the 2nd Amendment Unaffordable
  • “You Didn’t Eat That Again, Did You?”

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2023 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.