The diversification of an investment portfolio has been described as the one “free lunch” in the investment world. That is because holding a portfo¬lio of assets with unique risk and return characteristics can result in higher long-term returns and a lower risk profile.
October has come and gone, which is likely a relief for investors. October gets a bad rap when it comes to the stock market, and perhaps deservedly so: It was October of 1929 when the slide into the Great Depression began in earnest with a 20 percent dip in the stock market. It was also October, in 1987, when Black Monday resulted in the stock market falling over 20 percent in a single day. October of 2008 saw stocks decline 17 percent.
The third quarter of 2018 was a mixed bag for investors. Stocks, at least domestic stocks, performed admirably. The S&P 500 rose 7.7% in the quarter and is now up 10.6% year-to-date. Small-cap stocks have performed even better so far this year, rising 14.5%.
The mid-term elections are right around the corner. That means that the phone is ringing with questions about how the elections could impact the stock market. Generally, we prefer to keep politics and investing separate, but we grudgingly accept that they can influence one another in the short run.
October 1st was our ten-year anniversary. It is true that Armbruster Capital was incorporated a little over nine years ago. However, Mark started working at our predecessor firm, and building what would become Armbruster Capital, a decade ago.
Where is the US economy headed?
Recent news coverage about an inverted yield curve, potential trade wars, and troubles in emerging markets have created some unease.
The stock market achieved an all-time high in late January, but then saw a subsequent drop of more than 10 percent. Since then, it has vacillated wildly, reacting to strong economic news, yet also showing signs of concern. The Fed has been raising short-term interest rates, and volatility has returned in earnest. This has set up a “Tale of Two Markets” scenario, which is making investors question if they should get out of stocks altogether.
While it may come as a surprise, the second quarter of 2018 was actually quite strong for stock investors. The S&P 500 rose 3.4%, mid-cap stocks gained 4.3%, and small-cap stocks returned almost 9.0%. Even REITs rebounded in the quarter for a gain of 7.8%.
Certainly, we’re in a divided age currently where the glass could look half full or half empty depending on which side of the political aisle you sit. Unfortunately, that has been true for some time now. The same dynamic is also at play in the stock market.