It was a tough month for the S&P 500, which managed to eke out a sliver of a return, bringing its YTD return to 3.01%. The S&P MidCap 400 returned 1.35%, moving it back into the black, up 2.08 YTD. The S&P SmallCap 600 returned 2.68%, bringing its YTD return to 2.95%.
Across the Atlantic, European developed markets declined 1.56%, with YTD returns for the region down slightly. Pacific Rim markets dropped 1%. The Nikkei 225 finished up a healthy 9% YTD. As for the rest of the Pacific Rim, YTD returns across Australia, Hong Kong, New Zealand and Singapore remained solidly negative.
In Emerging Markets, Eastern Europe, Latin America, Brazil, India, and China collectively posted a 3% loss, leaving returns for the category off 13% YTD.
In economic news, Japan slipped back into a recession. Eurozone inflation for October came in positive, up 0.1%. And the October Eurozone Purchasing Managers' Index came in at 54.4%, its highest level since May 2011.
China’s official 7.0% growth prediction fell to 6.5%, as Chinese exports declined 6.9% year-over-year in October, with imports declining 18.8%.
In the U.S., the employment report posted 271,000 net new jobs for October. The unemployment rate fell to 5%, the lowest rate since April 2008. The Fed appears ready to increase interest rates in December. The second report on third quarter GDP posted a 2.1% annual rate, which was up from the previously reported 1.5%.
Domestic consumer prices still showed signs of inflation below 2%. The October Durable Orders Report came in with a 3.0% gain, but the measure remains down 4.2% YTD.
Housing news was mixed. October existing home sales posted a 3.4% monthly decline but new home sales increased 10.7% for the month.
The yield on the 10-Year Treasury note finished the period at 2.21%. Gold closed at $1,065.80 an ounce. Benchmark United States Crude closed at $41.65 a barrel.
Around the world, anxiety is palpable. We hear about terrorists, Paris, Brussels, Mali, London and now San Bernardino. These extraordinary events are clearly worrisome and should not be downplayed. Neither should the financial risks. But from an investment perspective, there is little investors can do beyond the usual prescription of tailoring asset allocation to investment objectives, diversifying broadly, setting realistic expectations, and maintaining a long-term perspective. That’s the honest tough answer and the time-tested, optimal strategy. Bottom line: don’t be reactive. Investors who accept dramatic price fluctuations as a characteristic of healthy markets are more likely to achieve long-term success.