Autumn is officially here as the Fall Equinox is already behind us. The changing of the leaves is one of my favorite times of the year because their descent implies that the football season is beginning to take shape. In addition to watching my beloved Rams, the St. Louis Cardinals will be making another appearance in the playoffs. It is a great time to be a sports fan in St. Louis . . . again!
Investors had a tough run through August and September. As the 3rd Quarter of 2015 came to a close, the broad stock market indexes had posted the worst overall quarterly performance in more than 4 years. The worst performing sectors were energy, materials, and healthcare, with the healthcare sector posting its first negative quarter in nearly 3 years.
The big story in the third quarter of 2015 was whether China’s economy was actually slowing. Pair a possible global economic slowdown with concerns that the Federal Reserve could increase interest rates before year end and investors and traders alike reduced their portfolio risk. While it remains to be seen whether stocks can move back into positive territory by the end of the year, I continue to believe that volatility in both directions is likely to persist in financial markets throughout the remainder of 2015.
For months I feel like I have been a broken record, repeatedly stating that we are focused on providing our clients with portfolio diversification. The recent correction has illustrated yet again why it is critically important to concentrate our efforts on a risk tolerance that is appropriate for each client, maintain an investment discipline that is committed to diversification1, and utilizing alternative investments where it is appropriate. I believe pairing these investment strategies together can help our clients reach their long term investment goals.
While we certainly have a lot of living to do before the end of the year, in the immediate future investors will begin to digest the third quarter earnings reports. I am not going to attempt to prognosticate what the 3rd Quarter earnings will look like, but what I do know is they are going to matter for investors. With a stock market in correction, corporate earnings and economic data are going to have a significant impact on portfolio performance.
Conversely to what many expect, bad news could be good news for investors. Poor earnings results from corporate America and negative economic reports could cause stocks to rally as the marketplace may anticipate that the Federal Reserve will hold off increasing interest rates. Strong earnings and economic fundamentals could see selling pressure resume as a rate hike would be anticipated sooner by financial markets. Regardless of what lies ahead, we will be here to help our clients remain focused on their long term goals and objectives.
As I have said many times, I am going to rely on my experience helping clients navigate multiple stock market corrections and economic recessions. I believe recent history supports that staying focused on portfolio diversification1 and remaining committed to providing clients with appropriate portfolios based on their unique risk tolerance and investment style is the pathway towards long-term financial success.
In closing, I want to be sure to thank everyone that supported the One Club Golf Tournament. We had a great turnout and everyone I spoke with had a great time. I have to admit that next year someone else may have to be subjected to water balloon torture! Our next event to help sponsor our special children on Timmy’s Mountain in Honduras is the Trivia Night on November 7th. For details, please do not hesitate to reach out to us to get signed up today! In conclusion, as the leaves begin to turn into beautiful cascades of falling color, I would remind you to stay healthy, wealthy, and wise, and certainly . . . stay tuned.
1Diversification (Asset Allocation) does not does not guarantee a profit or protect against loss.