January 13, 2016
Dear Friends, Below is our recap of the 2015 financial markets. Last year was a difficult year for most of the asset classes as trouble in China and a precipitous decline in oil prices rocked every corner of the market. The first week of 2016 saw a selloff in both domestic and foreign markets, resulting in the U.S. stock market selling at approximately 10% off historical highs. Despite the turmoil and volatility, we would caution most investors against taking drastic action. Good financial planning and investing requires both discipline and patience. We will need both attributes in 2016. Please let us know if we can help you in any way, Matt & Andrew
Key Dates/Data Releases
1/4: ISM Manufacturing Index
1/6: International trade
1/8: Employment situation
1/15: Producer Price Index, retail sales, industrial production
1/19: Consumer Price Index, housing starts
1/22: Existing home sales
1/25: New home sales, Federal Open Market Committee announcement
1/28: Durable goods orders
Annual Market Review 2015
Volatility may best describe the equities markets for the majority of 2015, as they were impacted by economic stress in China and Greece, coupled with underwhelming corporate earnings reports, falling oil prices, and terrorist attacks here and abroad. While some economic sectors, such as housing and labor, offered favorable news, others, including exports and wages, showed little in the way of positive movement. Nevertheless, despite inflation running below the Fed's target rate of 2.0%, there were enough signs of overall economic growth to prompt the Federal Open Market Committee to raise interest rates in December for the first time since 2006.
Of the indexes listed here, only the Nasdaq posted a year-on-year gain. Not even a fourth quarter rally could bring the other indexes into positive territory for the year. Nevertheless, the fourth quarter saw gains in large caps as the S&P 500 finished up 6.45%, while the Dow closed the quarter up 7.0%. Even the Global Dow gained a little over 4.0% for the quarter.
U.S. Treasuries saw prices fall during the fourth quarter as the yield on 10-year Treasury bonds jumped 22 basis points for the quarter. Oil prices (WTI) continued to fall, dropping from $46.36 per barrel at the end of the third quarter to $37.07 per barrel at the end of the fourth quarter. Gold, meanwhile, also felt the effects of the global economy, finishing the fourth quarter at roughly $1,060.50 an ounce compared to $1,114.50 an ounce at the end of the prior quarter. Finally, not all falling values are necessarily bad, as the average retail price of a gallon of regular gasoline fell $0.29 to $2.034 at the end of the quarter.
As of 9/30
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
As the year came to a close, the Fed finally raised interest rates based on some favorable economic news, particularly on the labor front and, to a somewhat lesser extent, in the housing market. The Fed is expected to consider three to four more rate increases during 2016. However, falling oil prices, inflationary trends that have been less than robust, poor manufacturing and production numbers, and a glaring weakness in exports could impact whether additional rate hikes are in the offing for 2016.
Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.
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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.
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