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3rd Quarter 2017 Market Update and Review

Asset Class Performance Over the Last Twelve Months:

The portfolios rallied over the last twelve months ending September 30th. Bonds performed well holding their values and stocks continued their upward rise.


  • Cash Assets/Money Market funds continue to have low yields.
  • Interest rates on short-term cash assets rose over the last year. The 4-week T-Bill rate has increased from 0.20% a year ago to 0.96% at the end of the 3rd quarter.


  • Short-term bonds turned in slightly positive returns for the year, despite the increase in yields.
  • Longer-term bonds (which are more sensitive to interest rate changes) declined reflecting rising interest rates. In fact, the Barclays Long Treasuries Index declined -6.7% over the past year.
  • Foreign bonds had slightly positive performance over the last year.

STOCKS  (see Equity Index Returns chart below):

  • All Equity categories turned in double-digit returns except for the commodity-based asset classes of Precious Metals and Energy.
  • The Dow Jones Industrial Average was up 25.5% since 09/30/2016, and was up 5.6% for the latest quarter. The more broadly-based S&P 500 Index climbed 18.6% for the last twelve months, and was up 4.5% for the third quarter.
  • International equities turned in excellent numbers for the last year as Europe lead with a 23.0% return. Japan was up 14.5%, while Asian stocks posted a 20.0% return over the last year.
  • Technology was the clear winner turning in a 30.5% return.
  • Energy stocks made a turnaround from the declines of a year ago.

12-24 Month Outlook

    • The latest U.S. GDP (Gross Domestic Product) increased at an annual rate of 3.1% in the second quarter of 2017. This was a substantial increase over the first quarter’s 1.2% GDP rate.
    • We continue to expect the global economy to have improving GDP growth. The IMF is forecasting 3.6% Global growth for 2017, and 3.7% in 2018.
    • The Fed has implemented a program to reduce their balance sheet, and in so doing, will continue to raise rates into the foreseeable future as they reduce the assets.
    • We expect to see Congress cut corporate income taxes and bring them more in line with the global economy. There may be further tax policy changes to create a simpler tax code. We expect these changes to be implemented in 2018.
    • Unemployment was posted at 4.2% domestically in September. The US labor market has continued to show strength, adding an average of 197,000 jobs for the previous three months through August. Unemployment rates have continued to decline, while wage growth remains subdued. Globally, employment has been improving.
    • With the improving global economy, we expect increasing demand for goods and services worldwide.

Investment Strategy Moving Forward:

Our overall strategy is mostly unchanged from last quarter.

  • CASH – The Fed will continue to raise rates for the near-term, albeit slowly. We believe cash will continue to pay low returns, and as a result, our cash allocations will remain low.
  • BONDS – With the Fed raising interest rates, long term bonds are subject to declines. Accordingly, we are keeping a short duration on our bond holdings. International bonds may do well as their economies improve in the developed countries.
  • STOCKS – Looking forward, equities continue to have the best growth potential.
    • Domestic Large-Cap stocks should benefit most, and they remain our largest Asset Class holding in the portfolio.
    • European stocks are becoming more attractive as their economies are improving and the valuations are cheaper than the U.S.
    • Asian stocks should do well as growth continues to improve.
    • Energy stocks made a recovery this year due to low valuations and an improving economy. We believe this is an attractive sector for the long-term. As growth improves the demand for energy improves as well.


With all the above data, we see many positives worldwide. Continued growth with lower oil prices should bode well for the stock markets globally. There is little chance of an economic recession occurring, and thus, 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. We greatly appreciate the confidence you have shown in our services. Thank you for your business!




Blair McCarthy

Bijan Golkar, CFP®



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