2017 Q3 Market Commentary

In what feels like a broken record, investment markets across the board performed well this past quarter. Emerging markets were strong, European markets were strong, credit markets were strong, property markets were strong, and consumer sentiment was strong. U.S. markets, after bouncing around early in the second quarter, took off in September and posted a string of records that continued into the new quarter. This forward momentum occurred despite three devastating hurricanes that wreaked physical and economic havoc on Texas, Florida, Puerto Rico, and the majority of the Caribbean; political divisiveness in Washington; and nuclear saber rattling from North Korea.

In addition to growth in the stock market, this year so far has been marked by historically low volatility. There doesn’t appear to be an imminent catalyst for a surge in volatility on the horizon, barring perhaps a military escalation of the war of words between President Trump and North Korea’s Kim Jong Un. This year, only one in twenty trading days for the S&P 500 (a broad measure of U.S. stock market performance) have seen increases or decreases by more than 1%. That’s the lowest amount of volatility we have seen since 1982, when these figures were first recorded. Furthermore, we have seen no moves of plus or minus 2% for any single day—the lowest level in twelve years.

In addition to gains in the U.S. stock market, the economy has continued to expand. Second quarter Gross Domestic Product (GDP), a measure of an economy’s production, was recently revised up to 3.1% growth, a healthy rate. If the current economic expansion lasts another year and a half, it’ll be the longest on record, even surpassing the expansion of the 1990s that ended in early 2001. It is important to note it isn’t likely to be the “best” expansion of all-time, just the longest. From the recession bottom to the expansion peak, real GDP expanded 39% in the 1980s and 43% in the 1990s. So far, eight years in, this one is only up 19%. Nevertheless, the length of the current expansion is pretty remarkable. During the dark days of 2009, many market watchers would never have predicted the consistent growth we have experienced over the past eight years.

It has been roughly ten years since the 2007-2009 Global Financial Crisis started. That event left lasting scars on the global economy and many investors deeply wounded. We will close with a look back, lessons learned, and how they apply today. Ten years ago, the world was standing on the brink of that Global Financial Crisis. U.S. stocks, as measured by the S&P 500 Index, hit record highs in October 2007 before falling by more than 50% over the next 17 months. Most investors experienced some financial pain during that time.  Some gave into the pain and fled both stocks and bonds, going entirely into cash, because they couldn’t stand watching their investments plummet. Unfortunately, many of those investors made the wrong move at the wrong time – selling near the bottom and missing out on the rebound that occurred in 2009.

Ten years later, there is no shortage of market commentators suggesting investors should sell stocks and bonds before another possible market crash. Some investors may listen to their advice, believing they can reach their investment goals by buying and selling stocks and bonds at exactly the right time. We believe it’s difficult and unlikely for any investor to time the market. We prefer to take a more disciplined approach to investing by sticking with a set mix of global stocks and bonds, rebalancing from time to time, regardless of market conditions. Our advice is to remain diversified and disciplined and stay focused on long-term goals. This may not always be exciting, but historically this approach tends to be profitable.

The views and opinions expressed are of White Horse Advisors, LLC. This commentary is provided for educational purposes only and should not be construed as investment advice. White Horse Advisors is an investment advisor firm located in Atlanta, GA.