Heading Into the Homestretch

Fall is finally here, which means it's time for many of my favorite things: Cool weather in D.C., fall apples, Oktoberfest beers, Halloween, and scary movies.

Speaking of scary, October is usually thought of as a scary month for the stock market, but September actually has more historical down days in the markets. The good news is that I have nothing scary to report for September - or the third quarter.

Q3 2017 Numbers

The most commonly used benchmark, the S&P 500 Index, had another strong quarter, up 4.48%. That puts the S&P 500 up 14.24% through September 30th.

The average diversified U.S. stock fund, which is a better measure of how we invest than the S&P 500 by itself, gained 4.2%, which puts domestic stock funds up 12.3% through September 30th. Investors, still wary of high valuations in U.S. stocks and a long bull market, are exercising caution, with nearly $48 billion flowing out of stock funds during the quarter.

The average diversified international stock fund gained 5.9% in the third quarter. This gain puts international stock funds up an impressive 21.9% for the year. Emerging market funds are performing even better, up 26.5% so far. In a sign of investors' confidence in foreign markets, $48 billion flowed into international stock funds during the quarter.

The average intermediate-term bond fund returned 0.8% during the second quarter, which puts them up 3.2% from January 1st through September 30th. A whopping $95 billion flowed into bond funds during the quarter, likely due to concerns about the valuations of U.S. stocks.

Expectations for the Fourth Quarter

The President and Congress, having failed at two attempts to repeal and replace the Affordable Care Act, have moved on to tax reform. I assume we'll see more details about proposed changes to the tax code, but I'm not holding my breath.

When it comes to financial markets and investments, I honestly don't know what to expect. The markets have come a long way since March of 2009, which has been wonderful for investors. I know there will be a correction at some point, but I cannot predict when it will happen or what will cause it.

As we head into November - and prepare to celebrate Thanksgiving - let's be thankful for how our investments have performed over the past eight years. And let's also prepare mentally for things to change, because we know they will eventually.

Listening / Reading / Watching

Here's what has my attention right now:

• The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It by Michael E. Gerber. This book about the common problems plaguing most small businesses has been in my queue for a long time.
• Sleeping Beauties by Stephen and Owen King. What if all the women on Earth went to sleep and wouldn't wake up? Spoiler: It should come as no surprise to anyone that men (1) behave poorly, and (2) don't fare well.