The Rich Life Blog

Market Insight

Posted by Steve King

July 20, 2017

Markets Move Forward

Stocks and bonds continued to move higher through this year’s second quarter, albeit in more modest fashion than what we had seen to start the year. Solid economic data coupled with strong earnings and a lack of any significant “negative” news paved the way for this advance. In general, we’d say that global markets are right on script, having written the following in our most recent newsletters:

“Consumer spending drives the economy and personal incomes are on the rise; millions more are employed now than in recent years, wages are growing, as are housing prices, and modest gas prices are a big help. It’s no wonder consumer confidence is at its highest level in 14 years.  A confident consumer is a spending consumer, and we have reason to believe this will propel earnings and stocks higher over the next couple of years. This is the most important part of the story – we are moving from what has been an interest-rate driven bull market to an earnings-driven one, a much healthier form of growth.”

We repeat this summation because we believe this is, and will continue to be, the market’s most important underlying theme as we move forward. There will be other storylines for sure, including times when this upward-moving trend looks to be broken, but look for these periods to be fairly short-lived before the market returns to form.

Speaking of trends, earnings grew 15% in the most recently-completed quarter, the fastest pace of earnings growth in the last six years. Our equity-based investments have performed very well against this backdrop. And our buffered note positions have been outstanding. The international side of the portfolio has been particularly strong and is worth noting as well.  Look for continued out-performance on the international side of the portfolio over the next few years, which we discuss in more detail in our Global Pendulum post.

U.S. bonds are moving in anemic fashion, just as expected, with the BARCAP bond index up less than 0.25% over the last year. Ouch! Fortunately, our bond-based buffered notes and international bond positions have really propelled the bond side of our portfolios higher. In fact, our bond-based portfolio delivered its largest margin of out-performance versus the benchmark in our firm’s history. Look for us to continue this approach over the next few years, as we’ll need to stay creative to keep this portion of the portfolio moving forward.

Steve King is the Vice President at Wealthquest – a Cincinnati based financial planning and wealth management firm that offers a full range of financial services under one roof, for one simple fee.

All performance results have been compiled by Wealthquest, and have not been independently verified. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Wealthquest Corporation. Please remember to contact Wealthquest Corporation if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Please also advise us if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. A copy of our current written disclosure statement discussing our advisory services and fees remains available for your review upon request.

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