Where are we, at the end of September?
Some things flipped in September. In August, the stock and bond indexes were generally down and up, respectively, while in September the stock indexes were generally up sharply but the bonds were down. Our funds made very good money in August and “fairly” good money in September. It seems that you need to look at the months combined.
All of the below numbers are courtesy of morningstar.com.
| S&P 500 | 1.93% |
| Nasdaq (technology) | 1.05% |
| Dow | 2.08% |
| NYSE Composite | 2.81% |
| Morningstar Diversified Emerging Mkts | -0.10% |
| Russell 2000 (small co) | 6.09% |
| US Aggregate Bond | -0.48% |
How did our funds do? Clients of KII made money for the month, as you can see below (courtesy morningstar.com). One important observation that jumps right out, is that the LENDX fixed mutual fund made 0.88% in August and only 0.28% in September. Such a stark contrast leads one to consider the average of the 2 months, which was 0.58%. The average number seems to represent a reasonable return. I replaced FIDU, Fidelity Discretionary, with FHLC, Fidelity Healthcare, which did well. The poor month for FSMEX is a “head scratcher” considering healthcare made money. However, I’m looking at the big picture.
I’m very bullish on the emerging markets and I notice we had a mediocre month there. I view it as a temporary setback, maybe because IEMG made over 2% last month. The bond index was down a half percent in September but our floating rate funds made money. It’s a flip-flop from last month, which is why I diversify.
Following are the returns (courtesy morningstar.com):
| IEMG | 0.02% | iShares Emerging Markets | Fidelity commission free stock ETF |
| FQAL | 2.08% | Fidelity Quality Factor | Fidelity commission free stock ETF |
| ONEQ | 1.35% | Fidelity Nasdaq | Fidelity commission free stock ETF |
| FTEC | 0.92% | Fidelity Info Tech | Fidelity commission free stock ETF |
| FHLC | 1.23% | Fidelity MSCI Healthcare | Fidelity commission free stock ETF |
| FMAT | 4.00% | Fidelity Materials | Fidelity commission free stock ETF |
| FIDU | 4.97% | Fidelity Industrials | Fidelity commission free stock ETF |
| FBIOX | 1.98% | Fidelity Biotech | stock mutual fund |
| FSMEX | -0.84% | Fidelity Medical Equipment | stock mutual fund |
| CFRAX | 0.74% | Catalyst floating rate | bond mutual fund |
| FFRAX | 0.31% | Fidelity floating rate | bond mutual fund |
| RNDLX | -0.12% | RiverNorth Strategic | bond mutual fund |
| FNMIX | -0.01% | Fidelity New Market | bond mutual fund |
| LENDX | 0.28% | Stone Ridge Alternative | peer to peer fixed return mutual fund |
| Prime Meridian Small Bus LP | 0.72% | 1 month lag | private peer to peer fixed return |
| Prime Meridian Real Estate LP | 0.64% | 1 month lag | private peer to peer fixed return |
| KIP, Kay Income Partners LP | 0.56% | private mortgage fund |
Can We Trust the Markets?
Many of the clients call me and express real skepticism regarding the markets. We are still in a strong bull market, but bull markets climb a wall of worry. Quite a few clients don’t think that it makes sense that the markets could rise with the current President in office. They feel that we’ve fallen down a rabbit hole. HOWEVER YOU SEE IT, my answer to this is simple: keep your eye exclusively on the numbers. It’s very, very hard, way too hard, to make sense of all the inputs into all the equations. For now, the markets are showing genuine strength and the statistics simply don’t look like anything resembling an impending bear market. Period. However, a 10% correction (which I consider impossible to defend against) can happen at any time, and is probably overdue.
Your market model consists of a blend of stock and fixed return funds that corresponds to three things: your time horizon, your temperament and your need for income (principally retirees).
Your investment return(s) for the month of September was/were as follows:
We should talk if you would like to review exactly where you stand or if we should consider a change. I am available at your convenience. I have Skype video in case you would like to do a video conference.
Best,