Market Update – Winter 2018
It’s important to the team at the LCMS Foundation that you, our partners in ministry, are kept up to date on big picture economic trends and activity in the US and around the world, and how that may affect your investments, whether they are held with us or another firm. That’s why we’ve created this short newsletter to provide a brief overview of some of the key investment trends we are observing.
2017 was an excellent year for US investors, with high returns for stocks and modest but positive returns for bonds. Strong earnings and economic indicators, and optimism related to a more pro-business regulatory environment, combined to push equity valuations to record highs. The S&P 500 had its best year since 2013, while the Bloomberg Aggregate Bond index was up 3.5% for the year.
Returns on non-US investments in 2017 were even stronger than US returns. The developed Europe/Australia/Far East (called EAFE) Index was up 25% for the year, while the Emerging Markets Index, which includes China, India, and South Korea, was up 37.3%.
Markets have been unusually steady in the past two years, with volatility lower than normal, and trending only upward. A market correction of 10%, which typically occurs twice per year, has not happened since February 2016.
Key economic indicators for the US and the world reflect the strongest global economy in many years. The US economy grew for the eighth consecutive year in 2017, with 2.3% GDP growth for the year. Unemployment ended the year at 4.1%, its lowest level since February 2001.
The world’s largest economies are experiencing simultaneous growth. The Eurozone’s GDP grew 2.3% in 2017, China’s was up 6.8%, and Japan’s was up 1.7%.
The Foundation’s Preference and Standard Funds had strong returns in 2017, and have experienced good returns over the longer term also. The Standard Moderate Balanced Fund, which is comprised of 50% Equity and 50% Fixed Income has averaged 7.86% annually for the past five years; the Aggressive Balanced Fund, which is 75% Equity and 25% Fixed Income, has averaged 9.55% in that same time period.
Investors will be watching to see if the rally in the past two years can continue, or whether a pullback in asset prices might be due. Interest rates and inflation will play a central role; most anticipate the Federal Reserve will increase the Fed Funds rate three times again in 2018.
The LCMS Foundation offers highly diversified investment options, with a long-term focus, low fees and professional fund management. The Foundation’s Standard Funds are re-balanced monthly to long-term asset class targets, enabling our account holders to buy low and sell high between asset classes.
Please contact Ralph Simon, Vice President Investment Services, at firstname.lastname@example.org or 314-996-1056, or Mark Cannon, Chief Financial Officer, at email@example.com or 314-996-1462, if you would like to learn more, or inquire about opening an account with the Foundation for your ministry.