Morningstar Magazine - October/November 2016 - 27

Dispatches Global Briefs TRENDS Downturns, Recoveries, and Expansions The U.S. stock market hit new highs over the summer. Will it run out of gas? A lot of things certainly seem to be giving investors jitters. But some context may be helpful. There have been eight market downturns since 1926, the most severe one being the Great Depression. More recently, two consecutive downturns with little to no expansion made for a "lost decade." But as we've n n n l o o o l n o is ample potential for future growth, even after recent run-ups. $ p Recessions (from NBER) p Downturn p Expansion p Recovery 10 146 Mo 697.7% TR 18.6% Annl 44 Mo 193.3% TR 34.1% Annl 67 Mo 85.9% TR 11.7% Annl 16 Mo 50.9% TR 36.2% Annl 35 Mo 21 Mo 24.0% TR 13.1% Annl 6 Mo -22.3% 151 Mo 9 Mo 21 Mo -42.6% 51 Mo 63.3% TR 12.2% Annl 18 Mo 21 Mo 19 Mo -29.3% 5 12 Mo 14.6% TR 14.6% Annl 10 Mo 6 Mo -21.8% 135 Mo 523.2% TR 17.7% Annl 134 Mo 434.5% TR 16.2% Annl 3 Mo -29.6% 25 Mo -44.7% 49 Mo 37 Mo 16 Mo -50.9% 34 Mo -83.4% 01/1926 01/1936 01/1946 01/1956 01/1966 01/1976 01/1986 01/1996 01/2006 0.1 Source: Morningstar. Created with S&P 500 month-end total return data. Be Mindful of Pricey Low-Volatility Stocks AMERICAS United States For the year-to-date period through July, the top-ranked equity exchange-traded fund n n n o iShares Edge MSCI Minimum Volatility USA USMV. The fund vacuumed up 6.7 billion in net new n o l n n months of the year. As more money has piled in to this fund and others like it, valuations have richened commensurately. At current levels, newcomers to the low-volatility party could be setting themselves up for disappointing future returns. E X H I B I T 1 plots trailing-12 on o n o USMV on the left-hand vertical axis. As shown, o n n ll o n USMV's late-2011 inception. More recently, they've spiked higher. On the right vertical axis is plotted the ratio of USMV's trailing 12-month P/E ratio to iShares Core S&P Total US Stock Market's ITOT trailing 12-month P/E. This is a simple o l l . n greater than 1 M is relatively richly valued global.morningstar.com/Morningstarmagazine 27 http://global.morningstar.com/Morningstarmagazine

Table of Contents for the Digital Edition of Morningstar Magazine - October/November 2016

Contents
Morningstar Magazine - October/November 2016 - Cover1
Morningstar Magazine - October/November 2016 - Cover2
Morningstar Magazine - October/November 2016 - 1
Morningstar Magazine - October/November 2016 - 2
Morningstar Magazine - October/November 2016 - Contents
Morningstar Magazine - October/November 2016 - 4
Morningstar Magazine - October/November 2016 - 5
Morningstar Magazine - October/November 2016 - 6
Morningstar Magazine - October/November 2016 - 7
Morningstar Magazine - October/November 2016 - 8
Morningstar Magazine - October/November 2016 - 9
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Morningstar Magazine - October/November 2016 - 11
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Morningstar Magazine - October/November 2016 - 19
Morningstar Magazine - October/November 2016 - 20
Morningstar Magazine - October/November 2016 - 21
Morningstar Magazine - October/November 2016 - 22
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Morningstar Magazine - October/November 2016 - 25
Morningstar Magazine - October/November 2016 - 26
Morningstar Magazine - October/November 2016 - 27
Morningstar Magazine - October/November 2016 - 28
Morningstar Magazine - October/November 2016 - 29
Morningstar Magazine - October/November 2016 - 30
Morningstar Magazine - October/November 2016 - 31
Morningstar Magazine - October/November 2016 - 32
Morningstar Magazine - October/November 2016 - 33
Morningstar Magazine - October/November 2016 - 34
Morningstar Magazine - October/November 2016 - 35
Morningstar Magazine - October/November 2016 - 36
Morningstar Magazine - October/November 2016 - 37
Morningstar Magazine - October/November 2016 - 38
Morningstar Magazine - October/November 2016 - 39
Morningstar Magazine - October/November 2016 - 40
Morningstar Magazine - October/November 2016 - 41
Morningstar Magazine - October/November 2016 - 42
Morningstar Magazine - October/November 2016 - 43
Morningstar Magazine - October/November 2016 - 44
Morningstar Magazine - October/November 2016 - 45
Morningstar Magazine - October/November 2016 - 46
Morningstar Magazine - October/November 2016 - 47
Morningstar Magazine - October/November 2016 - 48
Morningstar Magazine - October/November 2016 - 49
Morningstar Magazine - October/November 2016 - 50
Morningstar Magazine - October/November 2016 - 51
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Morningstar Magazine - October/November 2016 - 53
Morningstar Magazine - October/November 2016 - 54
Morningstar Magazine - October/November 2016 - 55
Morningstar Magazine - October/November 2016 - 56
Morningstar Magazine - October/November 2016 - 57
Morningstar Magazine - October/November 2016 - 58
Morningstar Magazine - October/November 2016 - 59
Morningstar Magazine - October/November 2016 - 60
Morningstar Magazine - October/November 2016 - 61
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Morningstar Magazine - October/November 2016 - 63
Morningstar Magazine - October/November 2016 - 64
Morningstar Magazine - October/November 2016 - 65
Morningstar Magazine - October/November 2016 - 66
Morningstar Magazine - October/November 2016 - 67
Morningstar Magazine - October/November 2016 - 68
Morningstar Magazine - October/November 2016 - 69
Morningstar Magazine - October/November 2016 - 70
Morningstar Magazine - October/November 2016 - 71
Morningstar Magazine - October/November 2016 - 72
Morningstar Magazine - October/November 2016 - 73
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Morningstar Magazine - October/November 2016 - 76
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Morningstar Magazine - October/November 2016 - 88
Morningstar Magazine - October/November 2016 - 89
Morningstar Magazine - October/November 2016 - 90
Morningstar Magazine - October/November 2016 - 91
Morningstar Magazine - October/November 2016 - 92
Morningstar Magazine - October/November 2016 - 93
Morningstar Magazine - October/November 2016 - 94
Morningstar Magazine - October/November 2016 - 95
Morningstar Magazine - October/November 2016 - 96
Morningstar Magazine - October/November 2016 - Cover3
Morningstar Magazine - October/November 2016 - Cover4
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