Q3 Review

  • September and October were categorized by a significant rise in the 10-year Treasury Bond yield, rising from 4.26 to a high of just under 5%. Rising yields are driven by the actions of the Federal Reserve Board, and they have been increasing interest rates.  The mandate of the Fed is to get inflation under control, and raising interest rates is the tool they use to slow the economy down to try to decrease inflation. However, until these past few days, it felt as though the economy was whistling right along and not paying attention to the higher borrowing costs.
  • The U.S. economy continued to show no signs of slowing down and GDP was trending at  4.9% annualized growth. The labor market remained tight with record low layoffs and increased job openings.
  • Inflation remained somewhat stagnant as the U.S consumer spending remained very strong.
  • Additional geo-political risks and uncertainty caused some investors to reach for treasury bills for safety.

Our Thoughts

As we write this today, 11/8, we’ve seen a large downward shift in the 10-year yield. With an uptick in unemployment last Friday and a lower number of jobs added to the economy on November 2nd, we’ve seen a pretty substantial move higher in stocks and bonds. The theme of “short term bad news is good long-term news” remains, for now. These recent changes may be sign that the economy is slowing which may eventually lead to a decreasing rate environment. The time frame of when that will happen is hard to determine.

We feel that there is still opportunity in many different asset classes for clients’ portfolios. Bonds are showing signs of life that they haven’t in some time. With some funds yielding upwards of 6-8%, the continued relief from decreasing treasury rates is a welcome sight as this tends to be a positive for bond investment returns.

Small and Mid-cap companies who’ve taken the last 2 years on chin are beginning to look attractive at their current valuations. These companies carry a higher risk/reward profile than larger, more established companies. However, due to their size, small companies can adapt to changing environments quickly and do not have the sizeable overhead of a giant corporation. With current trends to “onshore” more manufacturing back into the US as well a focus on technological innovation, some companies in this space stand to perform very well.


Pardon our oft-repeated mantra – over the long term, your asset allocation (the mix of the different types of investments an investor holds in their portfolio) is the primary driver of long-term returns. We highlight some of these short-term movements to hopefully reinforce why we need to keep the long term in mind. Nobody has a crystal ball and, as your advisors and partners, we do not feel it is in  your best interest to try time these fluctuations.

However, it’s important to carefully consider individual investment goals, risk tolerance, and overall portfolio objectives before making any investment decisions. In the coming months we will be reviewing your individual asset allocation given these new market conditions to ensure your allocation is still in line with your personal longer term financial goals.

Past performance is no guarantee of future results. Please note that individual situations can vary. All investing involves risk including loss of principal. No strategy assures success or protects against loss. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.