By Scott Dawson, MS, CFP®
The third quarter was a positive period for most equity markets around the world as global corporate earnings continue to be strong. International equities (EAFE) have continued to outperform US equities (S&P 500) this year, which is a reversal from the last few years. History has shown that the performance of US and International equities go back and forth.
In conversations with clients, many have been surprised by how well the market has performed in 2017 since headline news is so negative. Concerns have included the events in North Korea, Trump’s tweets, Congress’ inability to work together, and Russia’s interference in US politics to name a few. Each event is an example of the ‘noise’ that can tug on our emotions. As humans, we are emotional beings and it is part of our DNA to take action to prevent us from being harmed. As prudent as it might seem to take interim action, like moving your investment portfolio to cash or not investing available funds, changing your long term investment strategy has not been kind to investors historically. Timing markets is a humbling and challenging task. Although markets can be temporarily influenced by headline news, they are fundamentally driven by corporate earnings and investors currently have focused on strong earnings, not political events.
We have been preaching for years to invest in an asset allocation (Risk Zone) that you are comfortable with and sticking with it. Investing in the equity markets does have its risks. Market corrections of 10% or more are common and expected. I wrote a blog a few months ago, “Stock Market Declines are Normal.” If you haven’t read it, I recommend taking a look at www.mosherellis.com/stock-market-declines-normal/.