Third quarter stock market performance
Important legal information about the email you will be sending.
By using this service, you agree to input your real email address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an email. All information you provide will be used by Fidelity solely for the purpose of sending the email on your behalf. The subject line of the email you send will be "Fidelity.
Tech stocks, a global rally, and lower-quality bonds drove gains. Each quarter, Fidelity's Asset Allocation Research Team AART compiles a comprehensive quarterly market update. Here is a summary of their outlook, plus four key investor takeaways for the second quarter of For a deep dive into each, read the Quarterly Market Update: Second Quarter PDF or the interactive PDF.
The worldwide recovery in industrial activity continued to bolster the most synchronized global expansion in the past several years. While growing political uncertainty surrounding the prospects for U. Supported by a weaker dollar, non-U. Amid signs of moderate-but-not-overheating economic expansion, flattish bond yields helped support a solid backdrop for most asset categories.
As inflation indicators firm, monetary policymakers turn less accommodative, and the U. As the year progresses, the uncertain outlook for U. Corporate earnings growth continues to rebound off the profit-recession lows of early , but a more moderate outlook in the growth trend could be likely, owing to a combination of factors.
For example, companies may have difficulty expanding profit margins from elevated levels as they face a secular peak in globalization and a cyclical pick-up in wages. While government policies can boost cyclical growth that could help company sales, the multiplier tends to be higher for stimulus when there is a large amount of economic slack and monetary policy is accommodative—unlike the current backdrop.
Moreover, boosting growth through fiscal stimulus may also be more difficult today following a sustained period of low investment. With the Federal Reserve Fed picking up the pace of monetary tightening, corporate interest expense may begin to rise, making it more difficult for corporations to continue to boost return on equity via higher levels of leverage.
Stock Market, Market Sector, Bond Market, Indexes, Total Market Index, Market Barometer, Sector Delta | Morningstar
On the other hand, the possibility of a cut in the corporate tax rate could support further profit growth. The global economy continues to expand in a synchronized fashion, with most developed economies in more mature mid to late stages of the business cycle.
The decline in unemployment claims suggests U. However, tighter labor markets are generating higher inflation, which is typically a key ingredient of transitions to the late-cycle phase. Although inflation remains relatively low, the recovery in commodity prices, including tighter supply-and-demand conditions for oil, further reinforces a firmer outlook for inflation relative to the past few years.
In terms of monetary policy, the market appears to have received Fed messaging and integrated it into expectations for more regular rate hikes ahead. While expectations for a normalization of monetary policy in Europe and Japan lag behind those for the U. With a growing number of industrialized countries no longer reducing government budget deficits after a multiyear period of austerity, policy action may be shifting from monetary to fiscal measures.
Globally, a key economic risk is the potential for more confrontational trade relations between China and the U. Technology shares led the broad-based gains across sectors with nine out of 11 posting solid positive returns.
Health care was one of the better outperformers while bond-proxy sectors e. In a reversal of the trend seen late last year, energy and financial stocks lagged the broader market, as did value and small-cap stocks. Growth and large-caps outperformed, potentially signaling less investor conviction in the timing and direction of potential changes to economic policy.
From a valuation standpoint, U. However, we believe that over the long term, stocks will sustain a valuation level closer to the average of the past 20 years.
Profits have rebounded after several consecutive quarters of negative earnings growth, helped by the recovery in energy prices. The rebound from the profit recession should continue and is supported by an increasing share of companies giving positive guidance, although the trend growth rate is likely to moderate in coming quarters.
International economies have shown renewed cyclical growth momentum relative to the U. Accordingly, the gap in corporate earnings growth has also narrowed, making the cyclical outlook for international equities relatively more attractive after several years of underperformance.
At the same time, the U. Both factors provide a favorable long-term valuation backdrop for international equity returns. Over the past three decades, rising globalization has coincided with an increase in global equity correlations, but recently, anti-globalization pressures may be contributing to greater diversification benefits for non- U.
Amid flattish interest rates, all fixed-income categories posted positive performance in Q1 and lower-credit quality bonds led the way. Credit spreads compressed in emerging-market debt and corporate-high-yield debt, making them the most expensive categories relative to their own histories. During the past year, lower-credit quality assets have performed far better than their interest-rate-sensitive counterparts.
Investment-grade bonds—the most interest-rate sensitive bond category—have historically offered better downside protection than stocks, even when rates were rising.
Bonds have had fewer instances of negative returns and less severe episodes of losses. Investment grade bonds have posted positive returns during nearly all medium- and longer-term time horizons—even during rising-rate environments—as higher coupons countered price declines. Most leveraged loans in recent years have included a LIBOR-floor provision to ensure a minimum rate paid to investors.
During Q1, the 3-month LIBOR rose above the average floor for the first time in several years, thereby allowing the variable-rate feature to provide an upward coupon adjustment if short-term interest rates continue to rise. Fixed-income strategies with designated allocations to both high-quality bonds and higher-yielding sectors have exhibited consistent downside protection. Over long periods of time, GDP growth has a tight positive relationship with long-term government-bond yields.
Although interest rates could rise further in the near term, we expect rates to settle close to our 3. Cyclically, late cycles have had the most mixed performance of any business cycle phase, with more limited overall upside than mid-cycle phases. From a long-term portfolio construction perspective, inflation erodes portfolio purchasing power and has been a headwind for equity and bond returns. Additionally, outright high inflation has coincided with a rise in the performance correlation between stocks and bonds.
Inflation-resistant asset classes—such as commodities, gold, commodity-producing equities, TIPS, and short duration bonds—have held up relatively well when inflation is rising—both cyclically and secularly. In addition when inflation is high, these assets have been one of the few diversifiers for equities. A strategic allocation to a basket of such assets may help investors manage the risk that inflation could be higher than anticipated over the long term.
Fidelity Brokerage Services LLC, Member NYSE, SIPC , Salem Street, Smithfield, RI Get a weekly subscription of our experts' current thinking on the financial markets, investing trends, and personal finance.
Venture Capital Outperformed Major Stock Indices during Third Quarter of - NVCA
Please enter a valid name. First and Last name are required. Full name should not exceed 75 characters. Enter a valid email address. Email address must be 5 characters at minimum.
Email address can not exceed characters. Please enter a valid email address. Thank you for subscribing. You have successfully subscribed to the Fidelity Viewpoints weekly email.
You should begin receiving the email in 7—10 business days. We were unable to process your request. Please Click Here to go to Viewpoints signup page.
View all Markets articles. Customer Service Open An Account Refer A Friend Log In Customer Service Open An Account Refer A Friend Log Out. Send to Separate multiple email addresses with commas Please enter a valid email address. Your email address Please enter a valid email address. Q2 key takeaways Tech stocks, a global rally, and lower-quality bonds drove gains.
Market Analysis Bonds Stocks. Read relevant legal disclosures. The Asset Allocation Research Team AART conducts economic, fundamental, and quantitative research to develop dynamic asset allocation recommendations for the Global Asset Allocation Division of Fidelity Asset Management FAM , the investment management arm of Fidelity Investments. Lisa Emsbo-Mattingly, director; Dirk Hofschire, senior vice president; Jake Weinstein, senior analyst; Austin Litvak, senior analyst; and Cait Dourney, analyst contributed to this report.
Kevin Lavelle, Fidelity Thought Leadership Vice President, provided editorial direction. The information presented above reflects the opinions of the authors, as of September 30, These opinions do not necessarily represent the views of Fidelity or any other person in the Fidelity organization and are subject to change at any time based on market or other conditions.
Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities.
Fastenal Company - Fastenal Company Reports Third Quarter Earnings
Views expressed are as of the date indicated, based on the information available at that time, and may change based on market and other conditions.
Unless otherwise noted, the opinions provided are those of the authors and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.
Nothing in this content should be considered to be legal or tax advice and you are encouraged to consult your own lawyer, accountant, or other advisor before making any financial decision. In general the bond market is volatile, and fixed-income securities carry interest rate risk. As interest rates rise, bond prices usually fall, and vice versa.
This effect is usually more pronounced for longer-term securities. Fixed-income securities carry inflation, credit, and default risks for both issuers and counterparties. Investing involves risk, including risk of loss.
Past performance is no guarantee of future results. Diversification and asset allocation do not ensure a profit or guarantee against loss.
Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes have been submitted. Please enter a valid e-mail address. Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail.
All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf. The subject line of the e-mail you send will be "Fidelity.
Your e-mail has been sent. Open a Brokerage Account. Signup for Fidelity Viewpoints Get a weekly subscription of our experts' current thinking on the financial markets, investing trends, and personal finance.
More tightening What this round of rate hikes may mean for investors and the markets. June market outlook With political risk receding in Europe, the economic expansion there looks sustainable.
May market outlook Earnings growth continues, but gap narrows between growth in the U. Stay Connected Locate an Investor Center by ZIP Code. Please enter a valid ZIP code. Careers News Releases About Fidelity International. Copyright FMR LLC. Terms of Use Privacy Security Site Map Accessibility This is for persons in the U.
Continued global expansion supported by U. Technology powered broad-based gains across sectors. International stocks and global assets: Widespread gains helped by improving earnings. Credit categories boosted by further spread tightening.