Q3 2016 Market Update: Watch and Wait as Economic Growth Continues

Over the last few years, our quarterly reports held a reassuringly simple theme: if you properly set your risk tolerance and remain invested in the markets through its ups and downs, you will be rewarded.


This advice was undoubtedly challenging to follow over the last twelve months, especially while the U.S. stock market experienced an intraday drop of 7% last August and a 14% decline in February. Throughout the period, though, we have stressed that investors are wise to remain invested as the fundamentals of our present economic growth have not changed.


Most recently, in the wake of the British decision to leave the European Union or “Brexit” vote, we wrote that “markets will adjust and recalibrate.” Though the vote to leave was unexpected, we did not see fundamental economic changes, though we anticipated increased volatiltiy and a short-term decline. In the months since, international and domestic markets have bounced back and then some; in fact, US markets are at all-time highs.


As the accompanying chart of the S&P 500 shows, the U.S. markets have experienced significant ups and downs since 2014, but the patient investor who ignored most of the news and remained focused on the long-term is up a total of 18.6%, or approximately 6.7% per year.


The U.S. economy has plenty of positive indicators: restaurants and shopping malls are filling up;  unemployment is down to 4.9%, and inflation of 0.8% remains well below the Fed’s 2.0% target. Meanwhile, wages are increasing faster than inflation, meaning that workers have more real dollars to spend, save, and invest. Oil prices rebounded to $50 per barrel after sinking below $30 in the winter, with varying impacts on consumers and different industries; for example, energy companies are typically more profitable with higher oil prices, while airlines fare worse given their reliance on fuel. We expect the Federal Reserve will continue its patient approach to interest rate hikes, though that could nonetheless include an additional quarter point hike before the end of the year.


Internationally, developed economies continue to search for solid economic footing. Though interest rates in several major developed countries are negative, Japanese and European stock markets have bounced back from the spike immediately following the British EU exit vote. There are also bright spots; emerging markets have bounced back on renewed strength of commodities and currencies, as this chart of the FTSE Emerging Market Index ETF, VWO, illustrates.

VWO(Chart illustrates the price history of the Vanguard FTSE Emerging Markets Index ETF, VWO; source: Google Finance)


Our guidance remains constant: continue to stay steady over the near term. Confirm your portfolio’s risk is well matched to your investment horizon. (Retake our risk questionnaire to make sure your risk tolerance is set correctly!) Uncertainty will always be a part of investing; we watch some predictable events with interest, though we also remain alert for the unexpected. As election season progresses here in the United States and we move into the fall, we anticipate investors will price in expectations about the election’s outcome while the economy continues its steady growth. At SigFig, we remain committed to delivering a globally diversified, strategic portfolio that provides exposure to many asset classes.
Aaron Gubin
Aaron Gubin leads research for SigFig’s Wealth Management team. He holds a Ph.D. in Finance and taught investments and portfolio management to graduate and undergraduate students before coming to SigFig. His research focuses on asset allocation, behavioral finance, and investment management.

The Impact of Brexit on Global Markets and Your Portfolio

Last night, the British voted “Leave” on their referendum to exit the European Union (EU). This result is poised to increase uncertainty and weakness within the union of 28 countries.

SigFig’s Investment Team expects increased volatility in global markets, as investors assess the impact of the vote. Though there are likely to be few immediate economic consequences, many European economies, and especially the British, are likely to suffer from weaker connections to the Continent, with global impact.

What should you do?

Focus on the long-term and ignore the short-term market fluctuations.

Markets will adjust to the Brexit result and recalibrate. Meanwhile, it’s important to recognize that a globally diversified, asset-class diversified, time-horizon appropriate portfolio will weather this storm. Your SigFig portfolio is designed to invest your capital wisely to endure the ups and downs of market volatility.

With the uncertainty about global economic growth caused by the Brexit result, international markets are likely to decline. Meanwhile, U.S. Treasuries are likely to be a source of safety and could rise as investors seek to relocate their capital to more stable assets.

SigFig portfolios deploy assets in all major markets, including the U.S., Europe, Asia, and points in between. Moreover, the portfolios contain U.S. Treasuries, investment-grade bonds, and other sovereign debts for asset-class diversification, while accommodating different risk levels and different investment horizons.

If in doubt about whether your portfolio is matched to your time horizon, retake our risk tolerance questionnaire.

P.S. With the British pound falling in value relative to the U.S. dollar, now is a great time to visit England!
Aaron Gubin
Aaron Gubin leads research for SigFig’s Wealth Management team. He holds a Ph.D. in Finance and taught investments and portfolio management to graduate and undergraduate students before coming to SigFig. His research focuses on asset allocation, behavioral finance, and investment management.

SigFig App Wins “Editors’ Choice” Award

Earlier this week, Google Play selected SigFig as an “Editors’ Choice” app — and we couldn’t be more thrilled. Judged by Google’s editorial staff to be one of “the best Android apps of all time,” SigFig Wealth Management is among the few finance apps ever to earn this distinction. The Editor’s Choice designation is reserved for trusted apps of the highest quality.

The SigFig Android app makes it easy for anyone to get access to high-quality, long-term investment management with low fees and low account minimums. Download it here for free.

Android Screens (1)

We’re always looking for new ways to make it easier for people to reach their financial goals, and our app plays a big part in that. In selecting which apps to award its coveted Editor’s Choice badge, Google Play looks at everything from app quality and material design aesthetic to integrated Android features and user experience.

Editors' Choice Badge

By awarding SigFig this honor, Google Play recognizes our commitment to providing our Investors with a great product. We’re incredibly proud of our team and the work they do to deliver the best app experience possible.
Looking for an exciting challenge? Want to solve big problems, shape the future of an industry and make a real impact on the lives of millions of people? Join our award-winning team here.
Yair Levin
Yair is Director of Mobile at SigFig. Prior to joining SigFig, he founded Slim, a cross-platform app that filtered social media news. Before that, he ran the asset management sales team for Israel’s largest investment bank. Yair served as a Tank Commander in the Israel Defense Forces and studied marketing and finance at IDC.