Index returns for periods ending September 30, 2017*
Once again, investors saw benchmark indices deliver healthy gains by the end of the third quarter. The Dow Jones Industrials, S&P 500, NASDAQ and Russell 2000 all returned between 4-6% in Q3. Foreign markets followed suit, with the MSCI World ex US gaining 5.62% and the MSCI Emerging Markets increasing 7.89%.
Fixed income markets also posted positive returns for the quarter. Long-term bond prices decreased slightly as the 10-year Treasury yield only rose 0.03% closing at 2.33%. The Bloomberg Barclays US Aggregate gained 0.85% over the quarter. Lower quality issues were up 2.04% measured by the BofA US High Yield Master II index.
The Federal Open Market Committee (FOMC) did not raise rates in September, but has announced it remains likely to do so in the fourth quarter in spite of a weak September employment report. Employment remains steady, having averaged roughly 172,000 new jobs per month over the prior 12 months.
The price of crude oil closed at $51.64 per barrel, marking an 11% increase from its closing value as of the second quarter end. Gold, which has been surging, retracted to $1,282.50 but was still higher than its June 30 closing price.
Hurricanes Harvey and Irma took a toll on jobs, as total nonfarm payroll employment decreased slightly for the first time in seven years – down by 33,000 jobs in September. Revisions to the July and August figures subtracted another 38,000 jobs. Most analysts suggest this is a temporary impact – employment growth has still averaged a healthy 172,000 jobs per month over the past 12 months, and average hourly pay has increased by 2.9% from a year earlier. The unemployment rate for September was 4.2% versus 4.4% in the prior month.
The Fed’s Beige Book, a summary of current economic conditions per Federal Reserve district, reported an expansion in economic activity in July and early August with all 12 districts reporting modest to moderate growth. Consumer spending increased in most districts for non-auto retail sales, while labor shortages were reported in some districts in manufacturing and construction. Data for this Beige Book was collected prior to Hurricanes Harvey and Irma.
New home sales and existing home sales both declined in August, reflecting weakness in the hurricane-affected Southern region of the country. Modest sales declines were also recorded in the West and Northeast regions.
The core Personal Consumption Expenditure (PCE) inflation index fell to 1.3% for August, while headline PCE prices continue to lag the annualized FOMC target rate of 2% with a reading of 1.4% for the same month.
As always, please call us to address your questions, and make sure to apprise your advisor of any changes to your financial situation.
*Indices used for hypothetical portfolios returns are the MSCI ACWI for equities and the BBgBarc US Agg Bond for fixed income. All data derived from Morningstar Office.