It's been 83 years since we’ve seen a quarterly comeback as strong as the first quarter of 2016. After falling more than 11% at the beginning of the year, the S&P 500 as well as the Dow Jones made gains all the way back to positive territory by the end of March. This truly proves that the markets cannot be timed. In approximately six months, this was the second pullback of more than 10%, heavily affecting investor confidence. We hit the bottom that was set last august, just as it seemed the markets would begin a deep downward spiral and have continued to move higher quickly.
On February 9th, Ron Sloy posted his monthly video Market Update. He asked for investor’s confidence and attention to long-term goals. Just two days later, the markets hit bottom, with the Dow closing at 15,660. As the quarter came to a close the Dow would move almost 13% to 17,685. Earning slight gains for the year.
2016’s first-quarter returns of the five major indexes, are listed here:
BarCap US Agg Bond +3.03%
S&P 500 +1.35%
Russell 2000 -1.52%
MSCI EAFE (Europe) -3.01%
MSCI EM (Emerging Markets) +5.71%
The volatility experienced throughout the quarter isn’t accurately shown in the indexes returns. The stand out has to be the Barclay’s US Aggregate Bond Index. The index has given a quarterly return of more than 3% less than %15 of the time. This is despite the momentously declining interest rate environment we’ve experienced in the last 10 years. This return was started by stock volatility. Now that the first quarter has ended, we don’t predict this trend will continue.
Our position in the Energy sector is somewhat heavy. This has been a bright spot in our portfolios this quarter. We believe the emerging markets are showing leaderships and anticipate good value there. Europe, Technology and Financials were all disappointing in the first quarter. We see great value in all of these sectors and are targeting good performance from each as the year moves forward. We consider the markets to have already established the bottom for the year and see the possibility of double-digit returns for equity portfolios. That being said, more volatility is to be expected. Investors who show patience and commitment to long-term investment goals will be rewarded.
Interest rates, Investment themes and Performance numbers aside, the one lesson we see from this quarter is that the markets cannot be timed. Investors must make investments based on their tolerance of risk and the time horizons of financial goals.
Thank you for your continued support and confidence. Please contact us, if there is any way we can be of assistance.