3rd Quarter 2016 Recap
In what has been a surprise to many, the major stock and bond averages in the U.S. have performed well in 2016. Interest rates have continued to stay low with the help of central bank policies throughout the world. In an unprecedented move central banks in Germany, Denmark, Sweden, Switzerland and Japan instituted policies to take interest rates into negative territory. Time will tell if this helps produce sustained economic growth or creates negative consequences for the economy.
Year to Date through September 30, 2016
S&P 500: +7.84%
International Stocks (EAFE): +5.82%
U.S. Aggregate Bond: +5.80%
All of the gains have happened while corporations have been in a profit recession. The past four quarters have produced negative profit growth. Thomson Reutersdata shows analysts believe that that profits have troughed and expectations are for profits to grow 8.6% in the 4th quarter of 2016 and around 14% in 2017.
On many people's minds is the presidential election. In every conversation I have had, not one person believes either candidate will be good for the country and that the economy and stocks will suffer. I don't know what will happen but I do know that corporations are in business to make money and be profitable. With the general mood being pessimistic it is more likely that we have positive surprises in the economy and markets.
Data from Morningstar.com