Year to date the market is up 6.7% as measured by the S&P 500 and the bond market is up just over 3.09% as measured by the Barclays Global Aggregate Bond Index.
The third quarter saw world stock markets record their largest quarterly drop in more than two years. The dollar strengthened after weak euro zone inflation data heightened expectations of stimulus from the European Central Bank. The dollar hit a four-year high against a basket of major currencies, giving the greenback its biggest quarterly gain in six years, and a two-year high against the euro.
The higher dollar pressured commodities, as gold touched a nine-month low. Brent oil slumped below $95 a barrel, hit by dollar strength and ample supply, and recorded its deepest quarterly drop in more than two years. U.S. crude settled at $91.16 a barrel, its biggest quarterly fall since the second quarter of 2012.
MSCI’s all-country world stock index of 45 countries dropped 2.8 percent for the quarter for its biggest quarterly fall since the second quarter of 2012, when the euro zone’s debt crisis peaked.
Worldwide there are several current events weighing on the markets. First, there are massive, and at times deadly, protests being waged in Venezuela. Some of their neighbors such as Argentina, Bolivia, and Ecuador have made clear their unconditional support for Venezuelan president Nicolas Maduro, while Colombia, Chile, and Peru have not. Elsewhere pprotestors are feeling their oats in Hong Kong. While these protests are non-violent, they are weighing on the markets. Young and old in Hong Kong want the freedom that comes with freely making more money — unencumbered by a government in their political affairs as they are unencumbered by a government in their financial affairs today. In Europe conflict between Russia and Ukraine continues to weigh on European markets. This conflict dates back to before the dissolution of the Soviet Union. Tensions between Ukraine and Russia escalated this past February, when protests for closer Ukrainian ties to the European Union drove out Ukraine’s pro-Russian president, Viktor Yanukovych. Back in November 2013, Yanukovych refused to sign an agreement with the EU that contributed to the political turmoil. In the Middle East, ISIS continues to be a problem. ISIS is a group thought to consist of only a few thousand people led by a shadowy figurehead. It has been able to defeat forces many times its size to capture a large part of Iraq. It is said that ISIS is the world’s most committed and fanatical radical organization. While it seems this is a new threat, ISIS has been around for a while. It has only recently gone by its current name, after the unrecognized Islamic State in Iraq and al-Sham (ISIS) was proclaimed in April last year. Al-Sham has been most commonly translated from Arabic as the Levant, hence ISIL. It was previously known as Jama’at al-Tawhid wal-Jihad, Al-Qaeda in the Islamic State of Iraq.
Domestically, although the data is somewhat mixed, the U.S. Economy continues to expand at a moderate pace. With all the turmoil and unrest around the world, we continue to believe the best place to invest is domestic markets.
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