Q3 2013 Market Summary for ClientsSubmitted by First & Main Financial Planners - East Bay Area: Oakland, CA on June 16th, 2014
The big news for the 3rd quarter of 2013 was a historic move in interest rates as the market anticipated the Fed would start tapering stimulus bond buying. Bonds got dumped across the globe causing prices to drop and yields to rise.
It’s tough to be in the prediction business because if you’re in it for long enough you’re virtually guaranteed to be wrong most of the time. The Fed kept saying its decision to begin tapering would be based on then available economic data and the data in Q3 said don’t start.
Their decision may have also been influenced by the potential for our legislators to draw lines in the sand with respect to our Federal budget and tying an increase in our debt limit to political ideals. The Washington bickering has in-fact been going on for a bit, with a partial government shutdown, but as I write this we’re getting the biggest daily 2013 jump in stocks since January because our representatives might agree to a short-term debt limit increase in order to give themselves more time to argue.
The government shutdown hurts the economy just a bit, more the longer it lasts. The market’s reaction to the potential for the beginning to the end of bond buying also served to create a small headwind for our economy as the cost of borrowing jumped without the Fed actually taking any action. The reality is the Fed will start to taper when the data say to do so, but they aren’t likely to raise short-term interest rates for some time, maybe not even next year. We won’t know until we see how well we’re doing then. Unemployment is still high and inflation low.
Europe is just barely out of recession, Brazil and India are not doing great while China seems to have stabilized their slowdown in growth pretty nicely. Here in the U.S. we’re still plugging along with some potential to increase our rate of growth but maybe only if other parts of the global economy start to show better signs.
This quarter bond markets calmed and interest rates slipped helping would-be home buyers, refinancers and borrowers of many stripes.
Emerging markets stocks came back some over the quarter, international developed markets stocks had an excellent quarter and while U.S. stocks were poised to have a very strong quarter they lost a bit toward the end with the Washington bickering. Year-to-date our best fund is up just under 26% (a U.S. fund), international up about 15%, while emerging markets are still down over 2% for the year but hold the potential to positively and meaningfully contribute to our wealth over the long run.
As always, I truly appreciate the confidence you’ve place in me with your assets and I want you to feel free to call at any time regarding your portfolio or any personal financial matter.
Erik S. Wolfers, MBA, CFP®