After I posted my piece on diversification last week, my colleagues Peter Essele and Anu Gaggar reminded me that they had done a study of some of the trends behind that post. Their analysis highlights a couple detailed examples of what I was talking about. This may be a more technical read, but the conclusions are compelling. Great job, guys! Over to Peter and Anu.

In the past couple of days, three different people have forwarded me an opinion piece that attempts to draw some parallels between the way the market acted in October 1987—before the infamous Black Monday—and the way it’s acting now. Some analysts are actually issuing alerts that we might get a significant pullback.

There’s no escaping coverage of the presidential election—what it means, whom to vote for, whom not to vote for. Many of us are deeply engaged in the process and passionately committed to one of the candidates.

At the same time, one of the most important personal consequences of the election will be its effect on our portfolios. Presidents come and go, but your retirement is on the horizon regardless of who’s elected.

Just as I do with the economy, I review the stock market each month for warning signs of trouble in the near future. Although valuations are now high—a noted risk factor in past bear markets—markets can stay expensive (or get much more expensive) for years and years, which doesn’t give us much to go on timing-wise.

Last week’s economic reports showed a range of data, mainly focused on business. The news was surprisingly positive across the board, with business sentiment improving substantially while job growth continued at a more or less steady pace. Overall, based on last week’s data, the economy continues to move forward, with this month’s good news largely reversing the bad news from last month.

After the bad news last month, several major economic indicators have bounced back significantly. The service sector was the biggest positive surprise, but manufacturing also moved back into expansion territory, and consumer confidence jumped up in a big way. Although job growth was somewhat below expectations, it remained at a healthy level.

Tomorrow, the Labor Department releases the jobs report—probably the most important economic report of them all. After all, jobs drive everything. As an indicator of business confidence, job growth is predictive; as the engine of consumer spending, job growth is determinative. We learn a lot about the economy from this report every month.

As I’ve mentioned, the European banking system is a key risk, and Deutsche Bank—one of the largest banks in Germany and Europe—is catching headlines over its troubles. There’s been a great deal of speculation about what this means for the U.S. and world economies and for stock markets. Some have even suggested this might be a “Lehman moment” that could trigger another financial crisis. I asked our international analyst, Anu Gaggar, to take a look and report back on what she found. — Brad

Writing my quarterly update the past couple of days, something occurred to me: international markets are beating U.S. markets for the first time in a while. This is big news, given that U.S. markets have dominated, unusually, for the past couple of years. Also noteworthy is that most asset classes are actually making money for the year—again, something we haven’t seen in a while.

September was a volatile month, with markets dropping only to bounce back at month-end. Large companies in the S&P 500 were down slightly, while smaller companies and those outside of the U.S. did well. Plus, as I discuss in this month's Market Thoughts video, there was a larger-than-expected pullback in the service sector, yet consumer confidence reached a nine-year high.