Third Quarter Market Returns

As you might have already heard the stock market took a dip in the most recent quarter.  Fixed income categories on the other hand did see mostly slight gains.   The Matson Money Fixed Income Fund (Short term Bonds)  is up 0.88% for the year.  1.  This is the first quarter in over 2 years that the S&P 500 (Large US Stocks)  has posted a decline, as it ended down 6.44%.  1.    As for International stocks, they were paced well ahead of US stocks for the year, but they also saw big losses this quarter.  The MSCI World ex USA Index (Non US Stocks) saw a quarterly loss of 10.57%. 1.

The following is information given by Matson Money to all clients on their quarterly statement.

“Internationally, there were several geopolitical events that put strain on the global economy. For much of 2015, the impending Greek default and potential Greek exit from the EU, and an eventual $86 Billion bailout weighed heavily throughout not only the Eurozone, but across the globe. This was followed in the third quarter with the news of a weakening Chinese economy. Already growing at its slowest pace in 25 years, the Chinese government chose to intervene in the marketplace to attempt to halt a massive sell-off. Despite these efforts, Chinese equity markets saw steep declines. These news stories rippled across the globe and undoubtedly caused some uneasiness with investors.” 1.

“Economic news domestically may have helped lift investor sentiments that had been affected by the negative news abroad. Continued job growth and an unemployment level continuing to drop as it nears pre-recession lows, along with low inflation and continued low interest rates are all very positive signs for economic growth at home. Despite positive news in the U.S, equity markets experienced some extreme ups and downs during the third quarter. In one day on August 24, The Dow Jones Industrial Average lost 1,089 points before rallying to close down 588 points. Without a strong investment philosophy, investors may be overwhelmed by all of the headlines and predictions coming out of the financial media when faced with this kind of volatility.” 1.

“Investors with Matson Money who work with a knowledgeable coach know that short-term volatility should not impact their long-term investment philosophy. Rather than panicking when this short-term volatility does occur, investors should arm themselves with the knowledge of the long-term data. According to an article by Dan Solin entitled Don’t Call Your Broker, from January 1926 – June 2015, the S&P 500 index experienced declines of 10% or more 28 times, with the average decline occurring over only 4.6 trading days. The type of volatility experienced over the last few months is nothing new, and it’s important to know how the market has responded following these bouts of volatility. In the subsequent one year following a decline, the S&P returned 23.56% on average. The five-year period following these declines produced an average annualized compound return of 13.33%. Markets have always been volatile throughout history, and those investors that have been able to stay committed to a plan to stay the course and avoid panicking have had the opportunity to take advantage of the generous returns that have been associated with being invested in equities.” 1.

So in words well spoken on the recent events dealing with the stock market, we see that is wise to stay the course and don’t listen to the fear and panic you hear on your TV and radio.  Understand that down markets come and go all the time.

By Jimmy Hancock

References

1. Matson Money. “Account Statement.” Letter to James Hancock. 20 Oct. 2015. MS. N.p.