Global equity markets followed their strong second-quarter showing with positive returns in the third quarter. Economic growth continues to slowly accelerate among major developed economies. In addition, employment remains strong. Large-cap stocks in the S&P 500 index gained +4.5% in the third quarter. Stocks of smaller companies, represented by the S&P Small Cap 600 index, did particularly well. They rose +6.0% for the three months ending Sept. 30.
International stock markets also saw strong positive returns. The MSCI Europe, Australasia and Far East (EAFE) index gained +5.4% in the third quarter. Emerging-market equities outpaced developed markets as they had in the previous quarter and gained +7.9%. The U.S. dollar’s continued weakening during the third quarter added to the momentum.
Bonds were modestly positive, with the Bloomberg Barclays US Aggregate index gaining +0.9% in the third quarter. The Federal Reserve, along with other central banks, is signaling an end to further expansion of their balance sheets as economic conditions continue to improve.
The Financial Engines perspective.
As we observed in the second quarter, global economic conditions and growth prospects continued to improve this quarter. Equity markets responded with positive returns, although volatility was higher in August. The political turmoil in the United States and other western countries adds to the uncertainty about future growth. Given these risks, it is wise to remain diversified at a risk level appropriate for your situation. A diversified portfolio can benefit from unexpected positive developments, just as it can protect against negative surprises. At Financial Engines, we’re monitoring market conditions to keep your portfolio allocation on track. Have questions? Financial Engines advisors are here to help.
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