Review of Q1 to Q3, 2015 by Sloy, Dahl & Holst, Inc.
November 2, 2015
The recent third quarter of 2015 was the worst performing three-month period for the markets in four year. From top to trough the S&P 500 dropped more than 11%, which was the first pullback greater than 10% since 2011. Although market volatility is unnerving, please understand that corrections are a natural occurrence in a healthy market.
Here are the returns for five major indices through September 30th:
BarCap US Agg Bond + 1.13% S&P 500 – 5.29% Russell 2000 – 7.73% MSCI EAFE (Europe) – 5.28% MSCI EM (Emerging Markets) – 15.47%
Volatility in Q3 was driven primarily by two events; fear of global sluggishness (especially in China), and uncertainty of the Federal Reserve’s decision on a rate hike. However, we perceive the recent pullback as a pause in the ongoing bull market and that we’ll very likely realize the DOW reaching 20,000 at some point in 2016.
Q3 corporate earnings expectations have been lowered so extensively that we expect many upside surprises. The U.S. market is performing better than people think, the European market is growing, and the Emerging Markets (especially China) continue to outpace the developed world. The housing and auto sectors remain strong and we are seeing stabilization in energy. We think a rate hike in December is still imminent, which we believe will be positive for the financial markets. We continue to like the following sectors: Financials, Energy, Health, Technology, Europe and the Emerging Markets.
October has begun with a nice bounce, but we predict that volatility may continue. By year-end, however, we believe the markets will produce a positive return.
We want to be the first to wish you and your family an amazing, happy, and healthy holiday season.
As always, please feel free to contact us with any questions or concerns.