After summer’s modest gains, it may seem that a chill autumn breeze now blows across global financial markets; however, most of the categories positioned to hold up best at such times are doing just that.

Current trends are causing this wind to be more in-our-face than at-your-back. Across most of Europe and Asia, growth is slowing. Some economies, notably Germany and Japan, even shrank during the second quarter. Clearly, this year’s events in the Ukraine and the Middle East are adding to this chill. Whether this contraction deepens remains to be seen, but it is clear that the actions most countries are taking to spur their economies are nowhere near sufficient. This is a particular challenge to emerging economies as prices fall for most of the commodities they export and the U.S. dollar strengthens further.

In the United States, this sluggish overseas growth is offsetting the advantages of lower energy prices, recent job gains and continued low interest rates and inflation. This has raised concerns about future corporate profits. Overall, though, the U.S. economy remains the world’s strongest and is significantly further along in its recovery from the Great Recession relative to rest of the developed world.

These economic developments obviously affected your portfolio. While U.S. large-cap stocks have held up best thus far, the more highly-valued small-cap equity category declined sharply. Their over-valued status is why we hold less of these than we otherwise might. Internationally, emerging market stocks – under-valued relative to those in developed countries – performed best since June. And commodities, which we eliminated from your portfolio in mid-July in favor of real estate, saw a double-digit decline – by far the largest of any major asset class – in the face of their falling prices due to the global slowdown.

In the fixed income area, we clearly saw hints of the flight-to-quality that typically accompanies equity declines. This continued the advantage of longer-term over shorter-term bonds in 2014 – something few predicted – with the highest-quality bonds faring best of all. And regarding Bill Gross’ late September exit from PIMCO: for now we are retaining the one small position in their short-term bond fund that we sometimes use due to their strong overall team and its solid past results, with a final decision by year’s end.

In light of global events, we believe your portfolio is properly positioned and diversified for the balance of stability and growth that you seek. The periodic rebalancing that we undertake has helped to protect some of your gains both earlier this year and in prior years. And while there are no changes to present at this time, we remain alert for any further shifts in ‘wind conditions’ that would prompt us to be in touch.