Weekly Market RecapThis week saw strong US data on employment and consumer spending. In Europe, the focus was on Greece, and its negotiations over debt payments with creditors. Greece represents less than 2% of the Eurozone economy, but continues to get a lot of headlines. Elections in Turkey late last week saw the ruling AK Party unexpectedly lose power, which may mark an important shift for the country. However, the brightest spot for the markets so far this year remain in Asia, where Japan and China among the best performing markets in dollar terms. The global markets have been relatively weak over the past month. We understand that volatility in the markets is never pleasant. Even so, current volatility is actually well below historical norms. What does this mean for your portfolio? It means that volatility could rise in the future if history is used as a guide. Though we have seen some market declines in the past months, these are a normal part of investing, and they have been relatively small compared with history. We ask that to you remain disciplined and patient should volatility increase, since our research shows that's what helps your portfolio to grow. The last significant decline we saw in the global markets was an almost 20% drop in the second half of 2011. Clearly, it can be tempting to change course in the face of such declines, but those who sold missed out on markets rebounding to new highs the very next year. Similarly, in 2008-9 which was one of the largest declines in a century, the global markets were once again back growing strongly over the subsequent years. However, those who panicked and sold during 2008-9 not only may have reduced the value of their savings, they also missed out on the global stock markets moving up 73% in 12 months off the lows. We don't know that the market will always rebound with the same vigor from declines as they have in recent history. However, researchers at the London Business School have compiled data across 23 countries going back as far as 1900 and found that the global markets have grown 5.2% a year on average, after adjusting for inflation. At that rate of growth your money doubles in 14 years. However, researchers from DALBAR have found that unfortunately, the average individual investor earns a far lower return, the biggest reason for that is panicking and moving to cash when the markets decline. So the academic evidence is clear that equity investing has offered impressive returns historically, but it also shows that in order to capture those returns patience and consistency is needed. If you are concerned about your ability to manage your portfolio in a down market, you may want to consider automatic rebalancing. With our sophisticated threshold-based rebalancing we'll keep your portfolio balanced for its strategic goals without you having to lift a finger. This is one of our Premium service benefits. Disclaimer: Your Portfolio Summary
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Saturday, June 13, 2015
Your Weekly Update - US Consumer Spending Improves
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