Summary Video: click here (3 minutes)
When writing these quarterly notes, previous messages are always reviewed to evaluate how circumstances have evolved and issues have changed or been resolved. Tracking the ups, downs, and outcomes facilitates learning and provides needed mile markers as we live and invest in a dynamic world. Looking back a year from now, we can all agree, this summer is looking up… even in the midst of a brutal heatwave!
Pandemics have been broadly discussed as a known risk since the globalization best-seller, The World is Flat, by Thomas L. Friedman, was published in the early 2000s (at least). And yet, Covid-19 shocked the world. While it hasn’t yet been eradicated, people, families, and businesses the world over continue to adapt and evolve. Speaking of evolution, did you know that iPhones, Facebook, and Google are not mentioned a single time in The World is Flat? And 2005 was just a moment ago! In the darkest times, it’s important to remember that the collective human spirit is a powerful force – pursuing progress.
The pace of GDP growth for economic recovery is unlike any we have seen in the post-WWII era, which we believe points to the enduring impact. So, while the recovery itself looks different, our core economic themes remain apt, and we continue to monitor their evolution.
In conclusion to this quarter’s message, and in every quarter’s message, there are positive and negative influences to consider in the economy and markets. Business cycles, interest rate movement, domestic vs. international markets, and economic dynamics are constantly at a tug of war. This is why we consistently emphasize the concepts of modern portfolio theory – we won’t know when things will pay off, but over time, we expect they will! Even the proverbial bee in the bonnet of these usual phenomena such as a pandemic or other disruption only result in temporary market responses. Let us all hold on to this example of the powers of disciplined, long-term investing based on a comprehensive financial plan. Have a great summer, and please reach out if you have any changes to your financial picture.
Sources: Dimensional.com, Visual Capitalist June 9th “A Global Perspective”, BLS.gov July 2 “The Employment Situation”, Atlanta Federal Reserve Board GDPnow July 2nd, Fred.com “U.S. debt as a percentage of GDP over time,” First Trust CPI watch May 2021
Small Cap: Smaller capitalization securities involve greater issuer risk than larger capitalization securities, and the markets for such securities may be more volatile and less liquid. Specifically, small capitalization companies may be subject to more volatile market movements than securities of larger, more established companies, both because the securities typically are graded in lower volume and because the issuers typically are more subject to changes in earnings and prospects.
International Equities: Investing internationally carries additional risks such as differences in financial reporting, currency exchange risk, as well as economic and political risk unique to the specific country. This may result in greater share price volatility. Shares, when sold, may be worth more or less than their original cost.
Emerging Market Equities: Investments in emerging markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.
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Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.
Barclays U.S. Aggregate Bond Index: The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index of fixed rate debt securities rated investment grade or higher by Moody’s, Standard & Poor’s, or Fitch rating services. All issues in the index have at least one year to maturity and an outstanding par value of at least $25 million to $1 billion based on the type of security. Indices are not available for direct investment and do not reflect any fees that may be charged.
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MSCI Emerging Markets: The MSCI Emerging Market index is an unmanaged index used as a representative sample of the global emerging market economy outside of the United States. The MSCI Emerging Market index consists of only stock holdings. Indices are not available for direct investment and do not reflect any fees that may be charge.
DJIA: is an unmanaged index of 30 companies used as a representative sample of the United States economy. The DJIA index consists of only stock holdings. Indices are not available for direct investment and do not reflect any fees that may be charged.
The Russell 2000 index is an unmanaged index of the 2000 smallest companies in the Russell 3000 index. The Russell 2000 Index is used as a representative sample of the small companies in United States economy. The Russell 2000 index consists of only stock holdings. Indices are not available for direct investment and do not reflect any fees that may be charged.
The Russell 3000 index is an unmanaged index of 3000 companies in the United States. The Russell 3000 Index is used as a representative sample of the United States economy. The Russell 3000 index consists of only stock holdings. Indices are not available for direct investment and do not reflect any fees that may be charged.
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