Over the course of the third quarter, we saw three different types of markets: in July, negativity triggered by oil prices and concerns over interest rates prevailed, in August, positive market sentiment struggled with opposing market views, and in September, the market finally seemed to recognize that the economic expansion still had legs. The net effect for the period was a market that ended slightly negative, despite the gradual improvement during the quarter.
With the second quarter's GDP numbers revised upwards, it has become clearer that July's reaction to the second quarter news may have been overblown. And, although higher oil prices are psychologically jarring, in actuality consumers now spend about one third less of their income on energy expenditures than they did 20 years ago, even at current prices. Furthermore, despite frets over oil and three hurricanes that devastated large swaths of the Southeast, the economy appears on track to produce additional strong fundamental numbers for both the third and fourth quarters. Business capital spending is trending up, and recent personal income and consumption data show continuing consumer stamina. Despite these factors and many other solid fundamental numbers, the market still seems to be indecisive.
Over the multitude of market cycles that we have managed money, we've learned that the market ultimately follows the direction of the economy. Even so, during some periods other events or moods can overtake investors, and economic reality is given shorter shrift. Bubbles and crashes are the more extreme examples of this phenomenon, but we believe the current period is also one in which the market's disconnection with the economy is for reasons that have little to do with fundamentals. Election year politics has kicked up a fair amount of dust into the media, and some investors appear to be waiting for it to settle before deciding how to participate in the markets. In our view, one of the major concerns stemming from the question of the presidential election results is the fate of the growth-oriented tax cuts.
It appears that many investors do share our view that the growth-oriented tax policies initiated in 2001 were a key component to the market's turnaround in 2003. We hope that following the election, these policies, which have had such a positive effect on the economy and the markets, don't unravel. Whatever the outcome of the Presidential election, however, we expect that Congressional gridlock will mean that whatever changes are made to the tax code will be moderate and will take time to implement, giving investors ample time to adjust their portfolios, if necessary. Unfortunately, some investors appear to be avoiding any meaningful market participation until political and fiscal uncertainties are entirely resolved.
Based on our experience, investors who wait for perfect clarity from the market usually find themselves on the sidelines when the market does turn. Accordingly, we are looking beyond short-term concerns stirred up by election year politics and our portfolios remain positioned for an ongoing economic recovery. We believe that the economic expansion is entering a more mature phase and are thus favoring larger more-stable companies, which tend to do well during this middle period of the market cycle. Historically, this middle phase of an expansion has shown that it can endure for many quarters. Although we remain focused on equity sensitivity in our efforts to capture upside potential, our risk-management approach is keeping us away from lower-quality companies.
Of course, as long-time investors, we know that geopolitical events, weather, and crises of every stripe will crop up—just as they have occurred often in the past decades--over the course of one the greatest periods of wealth generation that the world has ever experienced. Since the nature and timing of these events is uncertain, unlike our certainty in the long-term upward trend of the economy, we have stayed true to our investment philosophy and remain fully invested. We understand that we must be in the market to participate in its upside, yet because we are acutely aware of all that can go wrong the other main tenet of our philosophy is to focus on risk management and wealth preservation at all times, not just in times of crisis, when it is often too late. By remaining true to this balanced approach to risk and reward, we have been able to withstand shorter-term travails and achieve longer-term successes, and our goal is to continue to do so as we strive to help our clients achieve their long-term financial goals.