Global Capital Markets
- Global stock returns were positive once again in September; however global bonds, real estate and commodities posted modestly negative returns.
- Global stocks remain the top performer over the last one, three, and 12 months by a noticeable margin.
- As displayed below, hypothetical portfolio mixes with larger allocations to stocks, which are generally considered riskier, outperformed more conservative mixes over the last one, three, and 12 months.
US Stock Markets
- The broad US equity market finished the month up 2.4%; US stocks are now up almost 14% year to date and over 18% for the last 12 months.
- Small caps bounced back in September and have now outperformed large caps in both the last one, three, and 12 months.
- Value outperformed growth in September but has trailed over the last three and 12 months across the capitalization spectrum.
- Over the last year, the size premia has been modestly positive with small caps outperforming large caps; however, the value premia has been modestly negative with growth stocks outperforming value stocks in the 12 month period.
Non-US Stock Markets
- In US dollar terms, US stocks outperformed non-US stocks in the month of September; however non-US stocks are still ahead in the last three and 12 months.
- Emerging market’s dominance ended in the month of September, posting negative returns. However they have still outperformed developed markets over the last three and 12 months.
- Foreign small caps have remained relatively similar in return to foreign large caps over all time frames displayed.
- The value premia has been modestly negative over the last three months but positive in September and 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 September.
- In recent months, interest rates have increased modestly.
- Over the last year, however, the curve shifted upward as rates across the curve increased by approximately 50-75 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 negative performance in September but remain modestly positive over the last three months.
- Long-term bonds underperformed short-term bonds amid increasing rates in the month of September; long term bonds have noticeably trailed over the last year.
- High yield bonds have outperformed Treasury and Credit bonds in the month of September as well as the last three and 12 months.
- Treasury bonds modestly lagged US Treasury Inflation Protected Securities (TIPS) in the month of September. Both have posted negative returns over the last 12 months.
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.