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Where We Stand: Investing

HERE ARE THE LATEST numbers from the world of investing:

  • The S&P 500 climbed 9% in 2018’s first nine months, after gaining 19.4% in 2017. These figures don’t include dividends. Since the market bottomed on March 9, 2009, the shares in the S&P 500 have climbed 331%, though they remain just 91% above their March 24, 2000, peak.
  • While 2018’s first nine months saw a return of volatility after a notably calm 2017, those who stuck with stocks have typically been rewarded, especially owners of growth stocks, which have handily outpaced their value stock competitors. Curiously, both U.S. large-cap and small-cap indices have outperformed midcaps. Meanwhile, developed foreign markets and emerging markets posted losses, in part because of a strengthening U.S. dollar, which drove down the price of foreign stocks for U.S. holders.
  • The benchmark 10-year Treasury note finished 2018’s third quarter at 3.06%, up from 2.41% at year-end 2017. In early July 2016, the 10-year yield hit a record low of 1.37%.
  • Short-term interest rates climbed in 2018’s first nine months, pushing up yields on cash investments like savings accounts, money market funds and short-term certificates of deposit. Matters should continue to improve: The Federal Reserve raised its target for the federal funds rate in March, June and December 2017, and again in March, June and September 2018.
  • Real assets had mixed results. Oil, which finished 2017 at $60, was $13 higher nine months later. Real estate investment trusts treaded water in 2018’s first nine months, after posting subdued returns in both 2016 and 2017. Gold, which ended 2017 at $1,305, fell to $1,196 by the end of 2018’s third quarter.
  • Bitcoin has been hammered in 2018’s first nine months, falling to $6,650 from above $14,000 at year-end 2017.
  • In September 2018, the Federal Reserve projected that the U.S. economy will expand 3.1% in 2018, with unemployment dipping to 3.7% and core inflation running at 2%. For 2019, the Fed is forecasting growth of 2.5%. Since the economic contraction of 2008 and 2009, real (after-inflation) gross domestic product has grown fairly steadily. But the pace of growth has been modest, averaging 2.1% a year over the eight years through 2017, including growth of 2.3% in 2017 and 1.5% in 2016.
  • As of 2016, 51.9% of U.S. families were invested in the stock market, up from 48.8% three years earlier, but below the 53.2% peak recorded in 2007, according to the Federal Reserve’s Survey of Consumer Finances. The survey is conducted every three years.
  • Index funds focused on U.S. stocks—both the mutual-fund and the exchange-traded varieties—attracted $1.6 trillion in new money over the past decade, while actively managed funds saw $1.3 trillion in redemptions, reports the Investment Company Institute’s 2018 Fact Book.
  • There’s been much handwringing over whether index funds are coming to dominate the U.S. stock market. But according to the Investment Company Institute, index mutual funds and exchange-traded index funds hold just 13% of U.S. stocks, versus 16% for actively managed funds and 71% for others, including individuals, hedge funds, pension funds and insurers.

Want to get a handle on stock and bond market valuations? Check out the chapter on financial markets.

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