Markets are mixed while the U.S. economy stays strong.

We saw mixed returns from stocks here at home and abroad, with foreign stocks performing a bit better than domestic. Bonds were down slightly in what turned out to be a rather calm month — the S&P 500 didn’t move by more than 1% on any day in September. Read more to find out why markets behaved as they did last month and what it may mean for you.

What happened.

September was a mixed month for stocks both at home and abroad. Foreign equities fared better: Developed-market stocks were up +0.87% and emerging-market stocks were down 0.53% (MSCI EAFE Index and MSCI Emerging Markets Index), while at home, large-cap stocks were up +0.57% and small caps were down 3.17% (S&P 500 and 600). With interest rates creeping up, bonds were down 0.64% (Bloomberg Barclays Aggregate Bond Index). In U.S. markets, September was another calm month: The S&P 500 didn’t move up or down by more than 1% on any day.

Why it happened.

Once again, saber rattling over trade affected markets, primarily in emerging markets that are more trade dependent. Those stocks fell sharply several times early in September as the U.S. threatened more tariffs. Some big up days followed when the tariffs were imposed at lower-than-expected rates.

The Federal Reserve raised short-term interest rates by 0.25% in September — the third increase this year — and signaled further rises are on the way. The federal funds rate is now at a range of 2% to 2.25%. As this hike was widely anticipated, it didn’t seem to unsettle markets.

We also saw more good news about the job market, with wages rising at the strongest rate since the Great Recession and the unemployment rate sticking at 3.9%.

Having reached the end of the third quarter, this is a good time to look back at the year so far. The big winner has been U.S. small caps, up +14.54% this year; the biggest detractor is international emerging-market stocks, down 7.68% year to date. In 2017, which was a banner year for all major classes of stocks, it was the reverse: Small caps returned the least (+13.23%) and emerging markets the most (+37.28%). This reversal illustrates the relative risk, generally speaking, of these types of stocks in comparison to U.S. large caps and international developed-market stocks. Their inherent risk is why we tend to include relatively small amounts of U.S. small caps and international emerging-markets in the portfolios we build.

As always, we emphasize the importance of investing for the long term. It’s been 10 years since Lehman Brothers went bankrupt, which was a key moment in the financial crisis. In this month’s sidebar, we look at what’s happened since and the lessons we may learn.

What it means for you.

In September, different markets moved in different directions, so your diversified portfolio is likely to be only slightly up or down. We build your personalized portfolio from the investment options in your employer’s 401(k) retirement plan. In addition to evaluating the available investments, we consider your risk preference, how long you have until retirement, and the other information you give us about your situation.

The more you tell us about yourself — your goals, other retirement assets, and how comfortable you are with risk — the better we can tailor your investments to your unique situation. Please log into your Financial Engines account or call one of our advisors to make sure we have the information we need.

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