This Monday, October 9, marks the 10-year anniversary of the S&P 500's highest point before the Great Recession. While the ensuing decade has provided quite a rocky road for the markets at times, the recovery is undeniable. The S&P 500 is now double its peak 10 years ago.
In fact, last week, markets posted one record high after another - and the S&P 500 had its longest streak of record closes since 1997. At the markets' close, the S&P 500 added 1.19%, the Dow gained 1.65%, and the NASDAQ grew by 1.45%. International stocks in the MSCI EAFE lost 0.07%.
These domestic gains came despite stocks stumbling slightly on Friday in reaction to disappointing jobs numbers. After 7 years of monthly growth, the September jobs report indicated the first labor market contraction since 2010, with 33,000 jobs lost. The decrease was largely due to the aftermath of Hurricanes Harvey and Irma. Despite this unexpected contraction, however, the unemployment rate fell to its lowest level in 16 years, and average hourly earnings increased by 2.9%.
We also began the first trading week of the 4th quarter last Monday, so we will review Q3's performance and what lies ahead for Q4.
How did the markets perform in Q3?
If we had to pick one word to describe performance in Q3, it would be: positive.
Sustained Market Growth
Throughout the quarter, all four indexes we track in this weekly update had solid showings and hit a number of record highs. The S&P 500 was up 3.96%, the Dow rose 4.94%, the NASDAQ jumped 5.79%, and the MSCI-EAFE gained 4.81%. Both the Dow and S&P 500 marked their 8th straight quarter of gains, and the NASDAQ was not far behind with its 5th positive quarter in a row. The S&P 500 even had its least volatile September in over 47 years.
Continued Global Gains
Globally, European and emerging markets posted their 3rd straight quarters of impressive gains. In September, Chinese manufacturing experienced its fastest growth since 2012.
What drove the markets in Q3?
Rather than last quarter's growth rallying around a few sectors, markets advanced broadly in Q3, with 10 of the 11 S&P 500 sectors gaining. This positive performance reflects solid corporate earnings, stronger oil prices, and impressive core capital goods orders - though inflation remained below the Fed's target of 2%.
What is on the horizon for Q4?
By most accounts, betting against a strong 4th quarter seems like a bad idea: The S&P 500 has grown during Q4 in 7 out of the past 8 years. Americans remain generally bullish on the economy and continue to increase their spending as their incomes grow and inflation remains low.
In addition, manufacturing, services, and housing all seem to be supporting economic expansion. This growth is not limited to the United States; globally, 94% of countries are experiencing year-over-year economic growth.
Of course, the coming weeks will give us an even clearer understanding of Q3 performance - and Q4 expectations. If you have questions about how the markets are affecting your portfolio and future, please let us know. We are here to provide the guidance you need and help clarify your investment process.
Quote of the Week
"If you can't do great things, do small things in a great way."
Golf Tip of the Week
Square Your Putterface
Accurately aligning your putter is critical if you want to consistently sink your shot. However, even if you read the line perfectly, you can end up seriously missing the hole if you open or close your putter's face at impact.
To identify whether you are accidentally shifting your putter, practice putting two balls at the same time:
- Place two balls next to each other on a green.
- Square your club behind both balls.
- Try striking the balls at precisely the same time.
Note how the balls move:
- Outside balls that roll farther mean you closed your face at impact.
- Inside balls that roll farther mean you opened the face.
- Balls that move the same distance mean you hit them squarely.
Continue practicing the above exercise until you can successfully square your putterface.
-Tip courtesy of Golf Digest
Financial Question of the Week
Can I claim Employee Business Expenses?
As an employee, you may end up making out-of-pocket purchases to support your workplace responsibilities. When you do so, you may be able to deduct some expenses. Here is further guidance to help you manage employee business expense claims.
Is there any limit on how much you can claim?
Typically, yes. You're able to deduct employee business expenses that total more than 2% of your adjusted gross income.
Are all expenses deductible?
No. The IRS has rules for the type of employee business expenses you can claim. The expenses must meet two criteria for your workplace responsibilities: be ordinary and necessary.
- Ordinary: an expense that your industry identifies as common and accepted
- Necessary: an appropriate expense that also helps the business
What are common expense examples?
The below list represents a sample of expenses that you can typically deduct and meet the "ordinary" and "necessary" requirements:
- Any clothes or uniforms you must wear at work and not for everyday use.
- Any tools or supplies you need to do your job.
- Education that supports your role at work.
- Travel for work that takes you away from your home.
To claim your expenses, you will need to file Form 2106, Form 2106-EZ, or IRS Schedule A.