Broker Check

Wealth & Pension Services Group
William Kring, CFP®
Chief Investment Officer

Q3|2018 Portfolio Commentary

Portfolio Review

The beginning of the quarter started where Q2 finished, with most of the market’s strength coming from a narrow group of technology stocks.  However, as the quarter progressed, there was a meaningful “broadening-out” of performance. Trade issues were undoubtedly front and center, yet the market overcame much of the concerns and finished strongly.  International stocks, which have been lagging (and dogged by trade concerns) made up some ground in the closing weeks, but are still negative year to date. Otherwise, investing in domestic stocks was generally rewarding in Q3, with S&P climbing back above its January high. Our models outperformed our diversified benchmarks, as well as industry benchmark - Morningstar Moderate Target Risk, consisting of 70-85% stocks.

Current stock valuations remain at somewhat elevated levels; investor sentiment is strong, and employment is robust. That leaves rising interest rates, wage inflation, and trade as current worries (excluding earnings, which always matter).

Helpful Asset Allocations for the Quarter

  • Hedged interest-rate bonds, large value, large growth 

Detracting Asset Allocations for the Quarter

  • Core bonds, international and emerging market stocks

Looking Forward

With yields now sharply on the move again in the first few days into the quarter, the market is struggling a bit. Is this a little interest rate fever before the real flu (i.e., the next recession)? If so, this down move is likely temporary, and may be followed by more gains. Earnings are expected to be strong again, and only time will tell if they will be strong enough to offset the prospect of higher yields. And, some bad news may be good news; If we get some data that shows slower growth, rates may moderate some, which could reverse the sell-off.

Overall, we continue our diversified posture and do not expect big gains, but hopeful for more gains in stocks. Perhaps a nice round 3,000 on the S&P is a target for investors. As for international stocks, we are optimistic for a meaningful rally, closing the valuation gap some, with U.S. stocks.

Although we report on a quarterly basis, our views on the global markets and economic trends are longer-term, requiring us to be patient with our investment and allocation decisions.  Our goal is to provide our clients with excellent long-term performance and ongoing peace of mind. We seek to achieve this through strategic asset allocation decisions, cost controls, investment selection, risk management, and tax management. Please refer to your performance report for your account returns and let us know if you have any questions.

Thank you for your continued trust in our firm, and please let us know if you have any questions.

William Kring, CFP®
Chief Investment Officer

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