The U.S. economy continued to show momentum during the Third Quarter of 2018. Corporate earnings were strong, unemployment declined, inflation remains tame and most indicators show improving financial conditions.
The stock market had a good quarter, as measured by the S&P 500, with a 7.2% return. Small stocks, as measured by the Russell 2000, returned 3.13% during the last three months. Growth stocks continued to outpace Value stocks – the Russell 2000 Growth Index gained 9.04% versus 0.90% for the Russell 2000 Value Index. Foreign stocks were up slightly in the third quarter. The FTSE Developed all cap ex-US index (Europe, UK, Australia and Japan) finished up 1.1%; that index is now down 1.8% for the year. Emerging markets (China, Taiwan, Brazil among others) declined 1.9% for the quarter, and are down 8.9% for the year.
Bond returns were just barely positive in the third quarter. The Barclays U.S. Aggregate Bond Index was up 0.04% for the quarter as interest rates moved higher. The 10-year treasury started the quarter yielding 2.85%, stayed range- bound before ending at 3.07%. The Federal Reserve has now raised interest rates three times in 2018 and has indicated that one more hike is likely before the end of the year.
Going forward, we will be watching corporate earnings, as investors have high expectations of solid increases. Trade disputes (tariffs) and increasing interest rates remain potential headwinds going into the final three months of the year.
For market updates, please visit www.nsinvest.com for Eric Kuby’s weekly commentary.
The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates (“North Star”) may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one’s investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation’s Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.