Looking back at the past quarter, the summer months (July/August) were slow followed by a more bullish September. The Federal Reserve (Fed), citing a slowdown in growth, cut interest rates in July and September in attempts to prolong the economic expansion. The European Central Bank took similar measures. Overall, the global markets were generally mixed for the quarter.

Here’s how some of the major metrics fared to give you an idea:

Index	3rd Quarter	1YR
S&P 500 Large Cap Index	1.19%	2.15%
S&P Small Cap 600 Index	-0.58%	-10.75%
S&P Developed BMI International Index	-0.26%	-1.59%
S&P U.S. Aggregate Bond Index (total  return)	2.07%	8.80%
S&P Municipal Bond Index (total return)	1.56%	8.19%
Dow Jones Equity All REIT Index	6.71%	16.21%
Dow Jones Commodity Index (spot return)	-2.31%	-3.24%

Source: Dow Jones, data as/of 9-30-2019 (doesn’t include dividends unless noted) Click here to view a comprehensive list of index returns.

A couple of comments on the chart above. First, we list the performance of the previous quarter as well as the previous year (not year-to-date). If we listed YTD, you would see how well 2019 has done. The S&P500 for example, is up 18.74% YTD. Instead, the previous one year covers October 2018 through Sept 2019 and includes the awful Q4 we had last year.

Second, you will see that not all stock indexes are positive, and small caps continue to lag relative to the other equity indexes. We can look at the YTD performance of the small companies (S&P Small Cap 600) as an encouraging sign, yet it’s up “only” 12.16%.

Another positive is on the bond side. Many investors have benefited from owning “bonds” as the recent year has been rock solid (US Agg Bond is +7.29%). And if you owned real estate in the portfolio, it’s been even better. At the end of the day, properly diversified investors should see positive returns for the most recent quarter, the current year, and from one year ago.

Some of the recent items crossing the news wire included the ongoing US-China trade dispute, Brexit negotiations, and record low interest rates. Most of this I’d consider to be “noise”, although it is noteworthy to see the 10-year treasury note yielding 1.67% (it started the year at 2.65%). While this is good for home purchasers and refinancing activity, much adieu was made about the yield curve inverting. Not often do we see a 2-year investment yielding more than a 10-year investment, but this was the case for a short period in Q3. Some pessimists point out that an inverted yield curve indicates a recession is imminent – but take that with a grain of salt. The data shows that inverted yield curve does not always result in a recession, but in cases where a recession did follow it was typically more than a year away. Nonetheless, this is something to watch.

Low yields may have contributed to the recent rise in precious metals. Silver and platinum have done well, as has gold – which is probably the more closely watched metal. Gold advanced 4% in the quarter, and is up @ 15% for the year, headed towards its biggest annual gain since 2010. The reason: in a world of falling and low (or negative) interest rates, nervous investors seek safe havens such as gold. They are less likely to miss out on bond returns when rates are as low as they are.

There is no denying that the first three-quarters of 2019 have been great, so we should all feel good about that. How great? Let’s just say that it’s been the biggest year-to-date gain since 1997 with the S&P500 up nearly 19%. To look at it another way, the market continues higher amidst uncertainty and political unease that we see blanketing the news channels. One might turn on the news and think the sky was falling!

Another piece of historical data that I’ll share (but not put too much weight on) is the fact that markets have typically risen in Q4 over the years. While it’s nice knowing that history is on our side, every given year is different. And most of us are invested for long-term purposes and shouldn’t focus on what could happen in the short term. We can simply rewind to a year ago. Those optimistic investors looking for gains in Q4 2018 would have been unpleasantly surprised because it was a terrible quarter. I always remind people to focus on the road ahead, through the windshield, not looking too much in the rear view mirror.

In closing, we should continue to brace for volatility. The turbulence is not going away, and ya know, I think that’s OK. It’s the new norm. In the meantime, we’re grateful for the small and continued wins in this prolonged bull market. The market will inevitably pull back at some point, and it won’t come as a surprise. For now, we’re focused on the road ahead and preparing for whatever may come our way.

Brandon

Disclaimer: This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the advisor. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Dow Jones. Data is taken from sources generally believed to be reliable, but no guarantee is given to its accuracy.