The financial markets do not always reflect what you read and hear about in the news media.
What do you think has performed better during 2015, US stock markets or International stock markets?
Europe is having difficulty. There are daily reports about the troubles Greece is having with its huge debt burden.
So Europe and other International markets must be underperforming the US stock markets, right? That would be logical.
When meeting with clients over the past weeks, most express surprise to find out that the opposite is true.
For 2015, International stock markets are outperforming broad US stock market indexes. Patterns like this can change quickly. This information is instructive concerning diversification and what to focus on: returns and your investment plan, not the news media.
Let’s review some 2015 broad stock market results through June 11, 2015. I’m not providing specific numbers below, as that is not the point. The trend or pattern is what is important.
US Large Company stocks Slightly positive
US Small Value stocks A little more positive
International Large Company stocks Much better than above
More than 2X greater than US Large
International Large Value stocks Even better than Intl. Large Company
Emerging Markets A little worse than US Large Company
As financial advisors, this is why we focus on adhering to our investment philosophy of broad global diversification, and do not focus on media headlines. Our disciplined philosophy provides results and a clear path towards financial success. Following media headlines leads to confusion and indecision.
The same applies for interest rates. The major headlines over recent months is that the Federal Reserve has not yet increased interest rates and is not expected to act in the near future.
In our blog post dated May 22, 2015, Interest Rates: Our View and What You Should Do Now, we pointed out that the Federal Reserve controls short term interest rates, while long-term interest rates can move independently of the Fed.
So while the media has focused on the Fed not taking action, one would think interest rates have remained unchanged in recent months. That is true for short term interest rates, such as up to 3 years.
However, longer term interest rates have increased significantly, especially on a percentage basis. The 10 year US Treasury bill has increased as follows:
Early April: 1.83%
June 11: 2.40%
This increase has caused mortgage rates to increase by 1/2% since April. The 10 year Treasury interest rate has increased by over 30% in a few months….while the headlines you read are that the Fed has not increased interest rates. Both are true, but very different.
Our objective is to provide our clients with information and advice they can understand, which helps you to reach your financial goals and enjoy a better life.
We hope this helps!