|SEPT||YTD||12 Mo.||SEPT||YTD||12 Mo.|
|S&P 500 (US large cap)||0.57%||10.56%||17.91%||MSCI EAFE (foreign large cap)||0.87%||-1.43%||2.74%|
|Russell 2000 (US small cap)||-2.41%||11.51%||15.24%||MSCI Emerging Markets||-0.53%||-7.68%||-0.81%|
|BBgBarc US Aggregate Bond||-0.64%||-1.60%||-1.22%||BBgBarc US Corp High Yield Bond||0.56%||2.57%||3.05%|
Source: Morningstar as of 9/30/2018
Favorable economic news continued to delight investors last month, and while the S&P 500 notched another small gain, developed foreign company stocks gained almost 1%. Beleaguered emerging markets continued to bleed, pressured by rising U.S. interest rates and concerns over how the next round of tariffs will affect their fortunes. The flip side of all this domestic prosperity is that 10-year Treasury rate spiked to 3.24% last week, which gives the Fed impetus to raise rates at their December meeting. Stock markets do well in low interest rate environments. With above-trend economic growth, a rising deficit (expected to exceed $1 trillion this year and for many to come), unemployment at historic lows, and wage growth running at 2.8% year-over-year as of September, we expect rates to continue their ascent. While the equity bull market has run a record nine years, more attractive bond yields will at some point seriously compete for investors’ favor.
As of next month, I am relinquishing this cherished tradition to Frank Sudal, Jason Kuhnle, SVP of Wealth Management, and the rest of the team. Their day-to-day involvement with clients and the markets makes their insights better than mine, although I will miss initiating the monthly communication with all my former clients. As many of you know, my son, Travis, and I are embarking on a great adventure next March, sailing our Swan 44 sloop around the world starting in Southern California via the South Pacific, northern Australia, Bali, the Cape of Good Hope, Barbados, and ultimately Newport, R.I. by summer, 2020. I am trucking my sailboat from Ohio to California in two weeks, and my wife and I will live aboard from November to March, cruising the California coast, where we lived for 20 years prior to moving back to Sandusky. She will join the boat by flying in and cruising with us through the more exotic locales like Fiji and Tahiti, but eschews the 2000+ mile open ocean passages, for some reason.