Global Capital Markets
- Global capital markets returns were generally positive once again in August as global stocks, bonds and commodities posted modestly positive returns with global bonds standing out as the top performer amid incrementally declining interest rates.
- Global stocks remain the top performer over the last three and 12 months by a noticeable margin.
- As displayed below, hypothetical portfolio mixes of with larger allocations to stocks, which are generally considered riskier, outperformed more conservative mixes over the last three and 12 months.
US Stock Markets
- The broad US equity market finished the month up approximately 0.2%; US stocks are now up 11% year to date and 16% over the last year.
- Large caps continued their trend of outperformance relative to small caps in August and have outperformed small caps by almost 7% year to date.
- Value has trailed growth over the last one, three, and 12 months across the capitalization spectrum.
- Over the last year, the both the small size and the value premia were modestly negative with small caps outperforming large caps and growth stocks outperforming value stocks.
Non-US Stock Markets
- In US dollar terms, non-US stock markets continued their outperformance relative to US markets and are now ahead over the last one, three, and 12 months.
- Emerging markets noticeably outperformed developed markets over all time periods displayed.
- Foreign small caps outperformed lager caps once again in August and have outperformed over the last three and 12 months as well.
- The value premia has been modestly negative over the last three months but positive over the last year.
US Treasury Yield Curve
- The US Treasury yield curve, which charts interest rates on US Treasury bonds with different maturity dates, was relatively unchanged in August.
- In recent months, interest rates have declined modestly.
- Over the last year, however, the curve shifted upward as rates across the curve increased by approximately 50-70 basis points from the near all time lows of last summer.
- As a reminder, the primary driver of returns on high-quality, investment-grade bonds is changes in interest rates which are inversely related to bond prices (i.e., when rates go up, bond prices go down and vice versa).
- Investment grade taxable US and non-US bonds (USD-hedged) posted slightly positive performance over the last one and three months.
- Long-term bonds outperformed short-term bonds amid declining rates over the last one and three months; however, they trailed over the last year.
- Investment-grade and high-yield credit bonds slightly underperformed treasury bonds in August; however, credit has fared well over the last three and 12 months.
- US Treasury Inflation Protected Securities (TIPS) modestly lagged nominal Treasury bonds over the last three months but outperformed over the 12 month period.
We hope you found this market monitor update valuable. Please reach out to us with any questions you have or if you'd like to discuss working together,
Kathmere Capital Management
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.
Stock Investment Risk
Stock investing may involve risk including loss of principal.Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.
Bond Investment Risk
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond and bond mutual fund values and yields will decline as interest rates rise and bonds are subject to availability and change in price. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.
Alternative Investments Risk
Alternative strategies may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor's portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, geopolitical events, and regulatory developments.