Worldwide equity prices were very strong over the summer, especially small US and
International Emerging Markets stocks. Real estate prices have cooled somewhat, but are still at all-time highs.
Every four years about this time, pundits and prognosticators provide a steady stream of
opinions about how the US election will impact the stock market. This election cycle has been
particularly interesting due to the perceived dislike of the two major candidates for President.
Trying to outguess the stock market is often a losing game. Unanticipated future events
(surprises relative to current expectations) may trigger price changes in the future. But the nature of those surprises cannot be known today. Investors are better served by avoiding the temptation to make changes to long-term investment plans based upon predictions of the outcome of an election.
The Federal Reserve keeps holding off on raising short-term interest rates in spite of relatively
good economic reports. Longer term rates are determined by market participants and those rates are still "smacking hard against the ground" as the Wall Street Journal recently stated. Many investors have opted to invest in stocks with high dividend yields to build cash flow in their portfolio and replace some of their bond holdings. That choice does however pose its own set of risks, as even solid dividend paying stocks have more volatility than bonds. Higher dividend stocks like telecommunications and utility stocks fell about 6 percent in the third quarter.
Lower interest rates have afforded companies in emerging markets to refinance their higher
interest debts recently, setting an all-time high for new debt issuance in September. Those interest savings should go directly to their bottom lines and improve profitability.
Inflation seems to be stuck in low gear and that may be what is keeping the Fed on the
sidelines. Recent oversupply of some food commodities like beef, pork, corn and wheat have led to price reductions at the grocery store.