Dec. 18, 2009
Market Summary
Third Quarter 2009
For the second consecutive quarter, the global stock markets posted very strong returns, offering committed investors about five years worth of “average” performance within the span of less than seven months and reversing much of the wealth erosion of the previous year. Credit markets were not left out of the act, as bonds of all types rose in value during the third quarter. Meanwhile, a sharp rebound in publicly traded real estate stocks and strong interest in other securities linked to inflation signal that investors are becoming more concerned about potential inflation. This represents a dramatic shift in sentiment from the deflation worries that dominated headlines in early 2009.
Although these high returns are clearly welcome, we remain concerned that investors are pricing in a robust economic recovery and a resumption of high growth rates that may not be sustainable. While it may be tempting to stretch for income in a low-yield environment, we caution against taking more risk than your time horizon justifies. We are pleased to observe signs of a more patient strategy in the increasing number of consumers who are choosing to address their debt issues. In recent months First Command Bank has experienced a sustained increase in applications for debt consolidation loans, which clients are using to pay down revolving credit card balances.
For longer-term investors, we think a healthy mix of offense and defense is warranted in this environment. The price momentum of recent months has weakened lately; and while the direction is unclear, we anticipate increased volatility in coming months.
Today we advocate a risk-managed approach emphasizing high-quality investments. In our view, this offers investors the best odds of success regardless of the investment climate during the season to come.
Data used in this report has been provided by independent sources and is for information purposes only. Past performance is no guarantee of future return. The views expressed are an appraisal of the current environment and possible events. It is always wise to consult a financial professional before investing.