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Income Report Card | November 2017

Author: Nathan J. Rowader
Date: November 15, 2017
Category: Asset Allocation, Financial Planning
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Historically, September and October tend to be the weakest months for stocks, but this year has been different as global stocks increased by 2.08% in October. The gains were broad based, with Japan increasing by 4.61% following Prime Minister Shinzō Abe’s reelection and emerging markets (EM) increasing by 3.51%. Other major markets gained as well, with U.S. stocks increasing by 2.33% and European equities gaining 0.47%. Small-cap stocks underperformed large-cap stocks, increasing by 0.85% and underperforming the S&P 500. Gains in foreign markets overcame weakness in the euro and yen relative to the dollar, which gained slightly less than 1% compared to other major developed currencies.

Income Report Card | October 2017

Author: Nathan J. Rowader
Date: October 11, 2017
Category: Asset Allocation, Financial Planning
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Despite the potential for seasonal weakness in September, the MSCI All Country World Index ended the month of September with a gain of 1.93%, achieving an all-time high on September 20th. In contrast to the rest of the year, emerging markets were not the primary contributor to returns as the MSCI Emerging Markets Index declined by ‑0.40% while the MSCI Europe and MSCI Japan indices increased by 3.30% and 1.96%, respectively. Unlike prior months, these gains were not primarily attributed to increases in currency. The U.S. Dollar Index increased by 1.90% from its 2017 low, which was hit on September 8th. U.S. stocks broke out of their anemic trading range with the S&P 500 Index increasing by 2.06% and the Russell 2000 Index increasing by 6.24%. The renewed strength in small-cap stocks is a good sign for market health. Historically, in a healthy and broad bull market, riskier small-cap stocks have outperformed large-cap stocks. However, this year the Russell 2000 has increased by 10.45% while the S&P 500 has increased by 13.72%. This relative underperformance was obviously worse at the end of August. At any rate, the overall stock market appears to be poised for continued growth.

Income Report Card | September 2017

Author: Nathan J. Rowader
Date: September 12, 2017
Category: Asset Allocation, Financial Planning
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Global stocks had a decent month with the MSCI All Country World Index ending the month of August with a gain of 0.44%. However, nearly all this advance can be attributed to the emerging markets (EM). The MSCI Emerging Markets Index gained 2.23% for the month of August while the S&P 500 Index gained 0.31%, the MSCI Europe Index gained 0.06% and the MSCI Japan Index lost -0.05%. Small-cap stocks continue to have a rough time, as the Russell 2000 Index declined by -1.27% on the month. Because of the strong August performance, the MSCI Emerging Markets is up 28.29% year-to-date, nearly three times the gain of the S&P 500, which is up 11.93% in 2017. Last month, we discussed the impact of currency and that much of the gains in foreign stocks and bonds can be attributed to the rise of the euro and yen relative the dollar. Since this has been a key macro event driving foreign assets, it should be no surprise that August’s lackluster returns for foreign stocks was accompanied by a decline in the U.S. Dollar Index, which fell -0.21% for the month.

Income Report Card | August 2017

Author: Nathan J. Rowader
Date: August 10, 2017
Category: Asset Allocation, Financial Planning
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July was generally a good month for all global markets as the MSCI All Country World Index increased by 2.79% led by the emerging markets (EM), which increased by 5.96%. EM was led by some of the larger economies, including China and India, which increased by 8.89% and 7.70%, respectively. U.S. stocks reached new highs in July as the S&P 500 Index increased by 2.06% and the CBOE Volatility Index reached record lows. From a sector standpoint, it is hard to put a label on July’s increase in the S&P 500 as the top sectors were a mix of 2017 favorites, such as technology, and some of 2017 laggards, such as telecom. Europe outperformed the U.S. and increased by 2.99% led by some of the peripheral economies such as Portugal and Ireland, which increased by 5.42% and 4.67%, respectively.

Income Report Card | July 2017

Author: Nathan J. Rowader
Date: July 10, 2017
Category: Asset Allocation, Financial Planning
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June was a bit mixed for foreign stocks. Emerging market (EM) stocks led the way with a gain of 1.04% for the month followed by Japanese stocks, which increased by 0.96%. U.S. stocks pulled ahead of Europe this month, posting a gain of 0.62% while European stocks declined by -0.45%. Currency continued to play a vital role in performance as the U.S. dollar declined relative other major currencies. In fact, European stocks did far worse in their local currency, posting a decline of -2.53% in euro terms. Bonds had a wild ride in June with the 10-year Treasury beginning the month at 2.21% and gradually sliding down to 2.14% (a year-to-date low), but jumping back up to 2.31% in the final trading days of the month. The move pushes the yield back into an earlier trading range that, if sustained, may see rates increase as much as 0.30%. For the month of June, global bonds fell 0.09% because of the increase in rates, U.S. high-yield corporate bonds increased 0.14% and EM corporate bonds were flat.

Income Report Card | June 2017

Author: Nathan J. Rowader
Date: June 14, 2017
Category: Asset Allocation, Financial Planning
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May was another positive month for international stocks, which increased by 3.75%, driven by the increasing value of the euro relative the U.S. dollar. In fact, the MSCI Europe Index increased by 4.79% in U.S. dollars, but only 1.65% in euros. Emerging markets (EM) also posted gains, with an increase of 2.97%, although this growth was as bit more organic as currency movement detracted from performance. U.S. stocks increased by 1.41%, bucking the typical “sell in May” mantra. International and EM sovereigns increased by 2.28% and 0.76%, respectively, while U.S. Treasurys increased by 0.83%. Currency also played an important role for international sovereign bonds, as the increase in the value of the euro accounted for nearly 1.50% of the monthly gains. Credit-sensitive sectors gained, but trailed the robust gains in global sovereign markets. U.S. corporate high-yield bonds increased by 1.03% and EM corporate bonds increased by 0.11%.

Income Report Card | May 2017

Author: Nathan J. Rowader
Date: May 8, 2017
Category: Asset Allocation, Financial Planning
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April once again favored foreign stocks over domestic stocks. International stocks increased by 2.61%, outperforming emerging market (EM) stocks, which increased by 2.21%. U.S. stocks managed to finish the month with a positive return of 1.03%. Global bonds increased by 1.13% during the month with foreign bonds outperforming domestic bonds driven by appreciation of foreign currencies against the U.S. dollar, particularly the euro. International and EM sovereign bonds increased by 1.79% and 1.70%, respectively, while U.S. Treasurys increased by 1.70%. Credit-sensitive sectors gained, but trailed the robust gains in global sovereign markets. U.S. high-yield corporate bonds increased by 0.81% and EM corporate bonds increased by 1.48%.

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Income Report Card | April 2017

Author: Nathan J. Rowader
Date: April 7, 2017
Category: Asset Allocation, Financial Planning
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March strongly favored foreign stocks over domestic stocks. International developed stocks increased by 2.8%, slightly outperforming emerging market (EM) stocks, which increased by 2.5%. U.S. stocks managed to finish the month with a slightly positive return of 0.1%. Overall, U.S. markets didn’t favor income-producing stocks, as utilities, U.S. real estate and MLPs all declined during March. Global bonds increased by 0.2% during the month with foreign bonds outperforming domestic bonds. International and emerging market sovereign bonds increased by 0.3% and 0.4%, respectively, while U.S. Treasurys fell -0.1%. Even credit-sensitive sectors such as high-yield corporate bonds fell -0.2%.


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