My thoughts and prayers are with the victims of Friday night’s terrorist attacks in Paris.  Events like this stir up many powerful emotions, including anger, fear, sadness, confusion, and regret, and these emotions are not easily repressed. It is difficult to shift our attention away from this tragedy and toward the financial markets in times like this, but it is my responsibility to do so. The equity markets this week have been up significantly, with some people speculating that terrorist threats mean the Federal Reserve (Fed) may not raise interest rates next month (though LPL Financial still sees a December hike as likely based on what they know now).

I’ve enclosed a list of what the markets have done in recent years during other terrorist attacks. I know it is sad to see that this horrible activity isn’t very new to us, but I thought it was important to give you some historical perspective and LPL Research has kindly made the information available to us. The obvious conclusion when you look at the enclosed information is that Equity markets have proven to be resilient to past terrorist attacks.

Currently, the Dow 30 Industrial average is trading at 17,622, only 678 points below its approximate closing high a few months back of 18,300 – only a 3.7% decline from the top. This is a very misleading number because the last few months have been very difficult for many sophisticated money managers. According to Hays Advisory, year to date, Warren Buffet’s Berkshire Hathaway is down around 10%, Bill Ackman’s Pershing Square is down around 17%, David Einhorn’s Greenlight Reinsurance is down nearly 33% and Joel Greenblatt’s Gotham Neutral Fund has suffered an 8% decline. The larger growth companies have been the only game in town over the last 20 months. Value investments have been lagging for quite a while and there is reason to wonder if that asset class is ready to become next year’s darling. That is why we diversify so diligently because it is very difficult to know in advance when another shift in asset class popularity will occur.

Moving forward, LPL Financial has been calling for 5-9% returns on domestic equity markets in general for this year. They have recently stated that it is more likely we will be in the lower part of that range, considering equity returns so far are barely up one percent, year to date.  They believe defense stocks may benefit from the heightened military posture many countries are taking against ISIS and oil prices may move up at some point due to geopolitical risk in the Middle East. Given how well supplied the global markets are currently, they don’t think Middle East impact if it happens, will be very significant at this time.

As always, should you have any investment questions, we are here to help you and most importantly, we hope you and your families have a happy and safe Thanksgiving! – Mark

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Some of this research material has been prepared by LPL Financial. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Referenced material: LPL Financial Weekly Economic Commentary and LPL Financial Weekly Market Commentary, both dated November 16, 2015, along with Hays Advisory- Hays Market Outlook, dated November 12, 2015. Reference tracking#: 1-441977.