Retirement Planning Advice and Financial Related Education by Barry Unterbrink, Chartered Retirement Planning Counselor

Friday, October 23, 2015

Stocks Roughed up in 3rd Quarter; Bonds Offset Losses

Wall Street produced some tricks, in that the 3rd quarterly period (July-September) ended lower for stock prices and most lower-quality bonds, with greatly increased volatility in prices. Starting in late August, stock prices fell sharply, and were down over 10% from their summer peaks at one point. In fact, there was just a short two-week span after Independence Day that served as the calm before the storm. The popular, broad-based stock indices – the Dow and S&P 500, fell over 7% for the three months (details below).

With a backdrop of that, it was difficult to make money as stock prices were hammered 7% to 9% on the popular averages*. There was just a two week stretch of time after Independence Day to feel good about the state of affairs, and then the wheels started to wiggle off the wagon. Through the trough or low in stock prices near the end of September, the Dow Industrials and S&P 500 indexes had fallen 10% each during the quarter.

With the threat of interest rates bring raised last month by the Federal Reserve, bonds first fell, then had a good jump up in price for the three months. Gold ended down 4% for the quarter, but did offset the panicky risks intra-period; i.e. August’s super volatile month for stock prices – where stocks fell 9%, saw gold rally 4%. Our goal here is to provide some gains without big drawdowns in bad markets in stocks. Gold has proven to provide a cushion to falling stock prices dating back to 1973.

For our managed accounts, we made some sales of equities in August at higher prices, which were prudent given the poor technical health of the stock market leading up to the late August free-fall and ensuing volatility. Those monies were used for short term bonds and mutual funds and ETFs, as we like to capture these monthly dividends paid on the exchange-traded funds we own between investment. 
We just recently – this month – have started to nibble on our favorite ETF’s as they have proven technically they can be “trusted” and the market averages have recovered a good deal of the lost ground. To that end, we favor utilities and the consumer staples sectors.

Economic-wise, the U.S. economy is faring pretty well vs. the rest of the developed world. Both inflation and jobs are in favorable territory; just 5.1% of our workforce is unemployed and the inflation rate is near 0% the past 12 months. But to be a skeptic also, if conditions can’t really improve much from here, can stocks, bonds and corporate profits move higher still?

Thanks for reading.

Barry L. Unterbrink
Chartered Retirement Planning Counselor
(954) 719-1151
Fort Lauderdale, Florida 
* 3Q-2015; S&P 500 down 6.9%, Dow Jones Industrials -7.5%

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