Review and Outlook: Q3 2017
The third quarter of 2017 provided investors with generally above-average returns, adding to gains for the year
- Major domestic stock indexes gained in the 3-5% range – led higher by technology stocks. Major international stock indexes achieved gains in the 5-8% range – led by emerging markets.
- Bond investors generally saw flat markets and little change in the major averages. The U.S. 10-year Treasury yield has stayed very range-bound since April, while overseas bonds are seeing some gains as those coupons are translated back.
- Commodities were very active in the third quarter with double-digit gains in much of the energy complex and industrial metals complex. However, livestock and food prices fell, some in double digits. That news is good for consumers, but bad for farmers.
From an economic perspective, we saw three areas of plateauing in the quarter – auto sales, housing starts and retail sales. Business investment and exports continued to be robust. The hurricanes will impact Q4 and likely bring a pick-up in the three areas mentioned above.
Perhaps the ‘newest news’ in the quarter was that the global economy sprang to life during the summer. The Eurozone, Russia, Canada, China and India (among the major economies) are all growing faster than the U.S. on a year-over-year basis through the end of the second quarter. In general, the U.S. has been leading all except China and India since the Great Recession, so this is something new. The U.S. Dollar Index (DXY) was down 2.6% in the third quarter, reflecting this change in relative economic growth rates.
We made some slight adjustments in portfolios during the third quarter to lower some stock allocations that were bumping up against the top end of the ranges in which we operate for the various asset allocation objectives. We also moved some allocation to emerging markets, due to their renewed growth. For more insights, please read what our key contributors have to say: