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3rd Quarter Market Update

I haven’t done a market update in some time and since the 3rd quarter just ended I figured it was time to share some data.  In this case, I am not sharing any thoughts. It’s just the facts!  Feel free to use this information to impress your friends. However, next week we return to lessons.  I think I will talk about behaviors and diversification.


  • Large Cap Growth has led the way in US asset classes with a YTD return of 20.7%. Small Cap Value has been the laggard with growth of “only” 5.7%, but most of this came in the 3rd
  • Mid Cap Value has been the leader since the market low in March 2009 with growth of 428%.
  • Corporate cash continues to climb as a percentage of overall corporate assets. This percentage is now right around 30%.  It was roughly 14% in 2000.
  • The Treasury Spread recession indicator is at 10.3%. This looks forward roughly 12 months.
  • The current economic expansion is at 99 months, which is double the average expansion of 47 months. The current expansion is also the third longest since 1900.
  • GDP growth has averaged 2.2% during the current expansion, which is lower than the 2.8% average being measured backed to the mid-1960’s.
  • 69% of GDP is Consumption. This explains why Consumer Discretion has been the leading sector coming out of the market bottom of 2009 with growth of 553%.
  • Household debt service ratio is just under 10% right now and it was at 13.2% in the 4th quarter of 2007. Household net worth has increased from $68 trillion in 2nd quarter of 2017 to nearly $98 trillion now.
  • Some of the drivers of GDP growth are lagging. They include working age population and immigration trends as well as the growth of real output per worker.
  • Wage growth continues to run below the 50-year average even as unemployment rates decrease.
  • All the major fixed income sectors are positive for the year ranging from the leader with Emerging Market Debt at 14.3% to TIPS (Treasury Inflation Protected Securities) at 1.7%.
  • All equity asset classes are positive for the year, except for Commodities, which is down 2.9% for the year. The leading equity asset class is Emerging Markets at 28.1%.  Next in line at 20.5% is Developed Market (International).
  • The probability of someone aged 65 making it to age 80 is 63% for men and 73% for women. Reaching age 90 is 22% for men and 34% for women.  Now, if they are as a couple at age 65, the probability one of them makes it to age 80 is 90% and age 90 is 49%.
  • During a 20-year rolling period from 1950 through 2016 a stock portfolio (S&P500) has averaged 11.1% annually and $100,000 grew to $823,015. A bond portfolio (aggregate index) averaged 6% and the same $100,000 grew to $318,764.  A 50/50 portfolio split between the two averaged 8.9% and grew to $553,221.  Sadly, the average investor from 1997 through 2016 has seen growth of 2.3% annually.
  • Here’s what happened to a 60% stock and 40% bond portfolio over the last 20 years. Just buying and holding, without rebalancing, grew an average of 6.6% annually.  By rebalancing annually the rebalanced portfolio saw annual growth of 7%.  The rebalanced portfolio also saw lower volatility and a higher risk-adjusted return.