The return on risk assets was mixed during the third quarter of 2019. The S&P 500 rose 1.70% with dividends while the Nasdaq rose 0.18%. Non-US equities had a tougher time with the MSCI World ex-US falling 0.84% and the MSCI emerging markets index falling 4.16%. Like the second quarter, we witnessed increased volatility with a selloff during mid-August and a rebound in September. Within the US equity markets, there was a trend reversal of sorts with high flying growth stocks lagging in comparison to the previously beaten down value names.
Investors continued to weigh the merits of a lengthening economic cycle despite disappointing manufacturing data. On the plus side, services industry data have shown resiliency and the national housing market has bounced with the aid of lower mortgage rates. Nevertheless, investors have taken solace with a Federal Reserve which has been content to cut interest rates and play it safe. In a world where risk free interest rates are at or less than 2% in the United States, the stock market which sports an earnings yield of 6% looks attractive in comparison.