When reviewing investment alternatives, average annualized returns are important, but they don’t tell the whole story. The sequence of returns matter as well. And as we’ll see, while they can have an impact when accumulating savings, their effects can be more dramatic for portfolios in distribution, such as during retirement. [Read more…] about Sequence of Returns – A Key Aspect of Investment Performance
In a Nutshell
- In a turbulent year for many asset classes, all managed to post positive gains.
- U.S. Stocks finish the year strongly and in a leadership position. Stock prices surged into the end of the year on the expectation that companies will be more profitable with a Republican controlled government.
- The U.S. dollar strengthened over the course of the quarter as the Federal Reserve decided to raise interest rates and talked of 3 more increases in 2017.
- Assets negatively influenced by rising interest rates, such as Bonds and Real Estate, struggled during the quarter, continuing a trend that began in late summer.
With the election tomorrow, I thought it would be timely to look at whether the stock market does better with a Republican or a Democrat in the Oval Office. It would be rational to assume that the stock market would perform better with a Republican since they are thought to be more business friendly. A recent survey by Fidelity found that 74% of investors think that which party controls the government has an effect on stock market returns.
In a Nutshell
- Stocks became favored again relative to bonds as markets have decided that the best (worst?) days of easy monetary policy are in the rear view mirror.
- Some of the best performing stocks for the year sold off during the quarter. It’s too early to tell if this is a short term reversal or the beginning of another change in leadership. It could be a result of investors taking profits ahead of the election and expected interest rate increases over the next year.
- Government and investment grade bonds were essentially flat for the quarter, acting as a drag for conservatively invested accounts.
- International stocks, especially emerging markets such as China and Brazil, continue to recover.