posted on October 12, 2015 14:08
The MSCI World Stock Index ended the quarter down 9.6%, the biggest quarterly drop since 2011. Stocks dropped sharply as concerns continued to weigh over the Fed rate hike and China’s economy. The S&P 500 Index fell 2.5% for the month of September and international large stocks fell 5.1%. International small stocks and emerging markets fared slightly better with declines of 3.1% and 3.0%, respectively. In better news, REITs gained 2.1% on falling rates and bond returns were mostly positive. Commodities fell 3.4%.
- The final estimate of second‐quarter real GDP growth came in at 3.9%, up from the previous estimate of 3.7%. The increase reflected higher exports and consumer spending, while the strength in the U.S. dollar limited growth.
- Inflation (CPI) was down 0.1% in the most recent month, keeping the year‐over‐year inflation rate at 0.2%. Inflation was held down by the sharp decline in gasoline prices in August.
- Job gains in September missed expectations at 142,000; economists had forecasted 203,000. The unemployment rate remained unchanged at 5.1%.
- The S&P 500 Index dropped 2.5% and U.S. small stocks (Russell 2000 Index) fell 4.9%. Large cap sector returns were mostly negative but utilities gained 2.9%.
- Developed international large cap stocks declined 5.1% and international small stocks fell 3.1%.
- Emerging markets were down 3.0% for the month. Large declines in Brazil and Indonesia dragged on the index.
- The 10‐year U.S. Treasury yield dropped to 2.1% as the Fed delayed raising rates in September.
- Intermediate‐term bonds returned 0.7% and international bonds gained 1.0%. Inflation‐protected bonds (TIPS) fell 0.6%.
- REITs gained 2.1% for the month. Commodities slumped 3.4% with energy prices declining sharply
The Rise of Values-Based Investing The number of investors looking to align their portfolios with their personal philosophies is on the rise. According to The Forum for Sustainable and Responsible Investment, total assets under management in socially responsible investments are now over $6 trillion in the U.S. This growth has led to products that screen out or weight securities based on many different values‐based factors. But finding the right solution can be difficult.
The challenge stems from all the ways responsible investing can be defined. Some investors may be focused on environmental concerns while others want to invest according to their religious beliefs. Savant offers two strategies in this effort, each emphasizing a distinct set of values.
Savant’s Social Values strategy is for clients looking to invest with prudence relating to family values, human rights, military and weapons, and other commonly held religious beliefs. The strategy screens out stocks and bonds directly involved in the identified areas.
Savant’s Sustainability strategy is for clients looking to invest in companies with strong environmental stewardship, commitment to the community, labor rights, and corporate responsibility. The strategy weights stocks and bonds based on their sustainability scores in the various areas to de‐emphasize companies that are causing undue harm to the environment, climate, community, or their employees.
It may seem intuitive that responsible investing would come at the cost of performance, but that is not the expectation. Savant’s values‐based strategies are comparable to our standard core strategies in the asset class and security‐level diversification, and we expect performance to be comparable over time. If you are interested in a values‐based portfolio, please reach out to your advisor.
Sources: Bureau of Economic Analysis (BEA), Federal Reserve, Institute for Supply Management, JP Morgan, Morningstar Direct, Standard and Poor's, Wells Fargo, Yahoo! Finance, BofA Merrill Lynch, wsj.com