The two key market moving news events of the last week were the Federal Reserve (Fed) meeting and the second quarter gross domestic product (GDP) report. The Fed indicated at its July meeting that labor market conditions continue to improve and their comments look to support an increase in interest rates at the September meeting. This is consistent with our team's expectation. I still expect a 0.25% increase in the Fed Funds rate at both the September and December meetings. The second quarter GDP report came in at 2.3% growth versus an expected 2.5%. The big surprise was the revision in first quarter GDP from negative 0.2% to positive 0.6%. This revision reinforces that U.S. growth continues to be moderate.
Stock and bond prices continue to be range-bound, and I expect this to continue through August. The biggest price moves continue to be in commodities as prices remain under pressure due to the stronger dollar, supply concerns, and the questions surrounding the Chinese economy.
I regularly hold roundtable meetings with our Penn Mutual associates, and at last week's meeting I was asked to comment on suggestions for personal investments in these market conditions. My advice is to follow the two "D"s -- Diversification and Discipline. I have been quoted before as saying "diversification is the cheapest form of risk management." I believe this to be very true for individuals as well as for institutions.
- Diversification. Develop a strategy that is appropriate for you, then select a diversified set of funds with different managers and styles to achieve those objectives.
- Discipline. Don't try and chase returns but develop a long-term plan to accomplish your goals. Be disciplined in rebalancing your portfolio on a regular schedule. Don't let the short-term performance of one sector -- good or bad -- change your strategy.
The broader equity market has exhibited strong performance over the past few years, and it has been a long time since the market had a correction. If you haven't looked at your holdings, this would be a good time to reevaluate your goals and make changes that are appropriate for you.
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.