facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
Quarterly Market Update Thumbnail

Quarterly Market Update


It is hard to believe we are now in the third quarter of 2019.  The second quarter was a pretty good one, so let’s take a look at some of the data with my normal quarterly review.

  • The current Forward P/E and Shiller’s P/E are slightly above their respective 25-year averages.  They are 16.74 vs 16.19 for Forward and 30.23 vs 27.02 for Shiller.

  • One-year returns have historically been positive with P/E readings in this range.  Remember the old famous line of – past performance does not guarantee future results.

  • Mid Cap Growth has been the leading asset class of traditional US equities so far this year with a return of 26.1%. It also led the 2nd quarter with a return of 5.4%. Small Value has been the “slacker” this year with a return of 13.5% and 1.4% this most recent quarter.

  • Mid Cap Growth has also led all US asset classes since the market lows in 2009.  Its return has been 531.7%.  Small Value has been the laggard with returns of 376%.  I wonder what all the Dimensional Fund Advisors (DFA) would say about that now as they love small and value stocks?

  • REITs (Real Estate Investment Trusts) have led the major asset classes this year with a return of 19.3%.

  • Just a quick reminder that markets don’t always just move up throughout the year.   Despite average inter-year drops of nearly 14%, the market has ended the year up in 29 of the last 39 years.

  • We are now in the longest economic expansion at 120 months.  It has been a fast 10 years!

  • Residential Investment and Motor Vehicle Consumption continue to be below average.  Are we supposed to automatically blame Millennials?

  • Growth in Workers is always a main part of overall GDP.  Projections for Growth in Working Age Population is basically flat for the next decade.  This is due to lower domestic birth and immigration rates.  I will continue to bang the drum this may be a concern for future GDP.  We either need more people or a big spike in Real Output per Worker.

  • Unemployment rate of 3.7% is well below the 50-year average of 6.2%.  Unfortunately, the Wage rate of 3.4% is below its long-term average of 4.1%, however, it has been climbing the past couple of years.

  • The Market continues to predict the Fed will be cutting rates, with some projections of a full cut of 1% in the next year.  I’m not feeling the same way.  Remember, the market and the economy are not the same thing.

  • The “Probability of US Recession Predicted by Treasury Spread” has spiked to 33% for June 2020. The last time it was this high was the end of 2007.  This is why some analysts are saying we may already be in a recession.  I also wonder if this is why the White House has been demanding a rate cut.  Do they know something we don’t?

  •  Just a reminder about investor behavior.  A 60/40 portfolio has an annual average of 5.2% over the last 20 years while the average investor’s return has been 1.9%.