3rd Quarter 2014
September 30. 2014

The third quarter of 2014 ended with something we have not seen much of during the past three years, market volatility. The list of usual suspects include turmoil in the Middle East, Europe’s struggling recovery, China’s slowing growth rate and the recovering US economy. All of these create a perfect situation for uncertainty. In the short term, this uncertainty creates selling in the market and a decline in stock prices. In the long term, opportunity awaits for those willing to endure the short term disruptions.

Most portfolios were down slightly at the end of the third quarter. This was driven primarily by the decline in stocks of small companies (Russell 2000 is negative for the year) and foreign investments (a strong dollar hurts returns on non-US investments). We have mentioned quite regularly, over the last year, that the market is due for a 10% correction as we are over 1,000 trading days since the last one. While we cannot predict exactly when that correction will come, we are prepared and will take advantage of this in our portfolios. This is a core component of our investment discipline and largely impacts future returns.

The fourth quarter brings anticipation of the Federal Reserve ending the bond purchasing program known as QE. The intent of QE was to stimulate economic growth by keeping interest rates artificially low. In our opinion, the third round of QE did little to stimulate growth. We will soon know the actual results as we get the 3rd quarter GDP numbers and the earnings season begins.

As we move into the fall, our focus transitions to year-end tax planning opportunities and our fall review meetings. We look forward to seeing each of you and welcome your call should you have any questions along the way. We hope you will be able to join us at our annual Christmas Party on Thursday, December 4th.

Dan Michalk, CFP®, ChFC