Third Quarter 2016 In Review

Investors were on edge at the start of the third quarter after it became clear the UK would withdraw from the European Union. Fortunately, the crisis passed without major declines in the stock markets. That left investors to worry about volatility caused by an increasingly unhinged US presidential election. We all know things haven't improved on that issue. Thankfully, it's almost over. At least I hope it is.

The good news was that both domestic and international markets posted decent gains during the third quarter. The S&P 500 gained 3.85% and the average diversified U.S.-stock fund returned 4.8%. The MSCI EAFE, which is the benchmark used to track developed international markets, gained 6.43% and the average international stock fund was up 6.2%.

The average intermediate-term bond fund was basically flat, with a return of 0.8%. Despite the low returns, investors flocked to bond funds, which saw inflows of $65 million. US stocks and international stocks saw outflows of $68 million and $19 million, respectively. The large outflows out of stocks and into bonds demonstrate that investors are still wary of what's to come in the stock markets. One analyst even referred to this seven-year run as "the most hated bull market ever". It appears investors want to park their money in “safe” investments.

In September, the Federal Reserve decided not to raise interest rates but left the door open for a rate increase in December. Maybe.

I expect markets to be volatile in the coming weeks. That's because we just entered earnings season, which will provide insight into how publicly traded companies are performing. Oh, and there's the election to consider. Expect markets to bounce around depending on what the candidates say and what new information is released about them. Hang in there!

My Takeaways From The NAPFA Fall Conference

I attended the National Association of Personal Financial Advisors (NAPFA) fall conference on October 13th and 14th. Here are some of the highlights from NAPFA's annual fall conference:

A different perspective on retirement. The nature of retirement is changing as people live longer, healthier lives. The idea of retiring to play golf or pursue other leisure activities doesn't always bring happiness. Staying productive, perhaps working part-time or pursuing a new career may be a better approach. I like the idea of creating an Autonomy Fund rather than a Retirement Fund in order to achieve this goal. I plan to implement this approach into my practice.
Financial exploitation of seniors is a problem. To clarify, the session I attended on this topic did not teach us how to exploit seniors. Instead, it gave us tips for identifying exploitation as wells as tools and organizations we can use to stop it from happening.
A looming exodus of fee-planners. There will be quite a few planners retiring in the next 10-15 years - and there aren't enough planners to replace them.
How to identify super trends that affect financial markets. I really enjoyed this session! We discussed how changes in, among other things, global age wave, globalization, artificial intelligence, autonomous cars, and urbanization will affect the world. The goal is to determine how we can help our clients by planning for changes that will ultimately ripple through the economy. Bonus: I added some great books to my reading queue.
This presidential election is a mess. Okay, I already knew that. Judy Woodruff of the PBS NewsHour spoke about the current election. After that, she led a great discussion about how we got to this point and what could happen depending on who wins in November. Of course, all of this was from a financial perspective.

Listening / Reading / Watching

Here's what had my attention this week:

News about the election. It's a trainwreck that I can't stop watching.
Westworld on HBO. I'm in sci-fi nerd heaven right now. Who wouldn't want to watch a series about androids who appear to have realized their sole purpose is to entertain their guests' dark fantasies? So far, there's been some excellent commentary about the nature of violent open-world video games.