Q1 2016 Economic and Market Perspective

Equity markets began 2016 on the back foot falling 6% in the first week of trading. The selloff continued with the S&P 500 falling another 5% before bottoming out in early February. At the peak of pessimism on Feb. 11th, all of the major U.S. stock indexes were down more than 10% for the year. That day the Dow Jones industrial average closed nearly 15% off its May 2015 record high, the S&P 500 was down 14.2%, and the NASDAQ composite was down 18.2%. This was the worst start to a year in stock market history. (www.finance.yahoo.com)


Fears about an economic slowdown in China, the world's second-largest economy, had rattled financial markets and added to the bearish sentiment in the oil market. The price of oil had briefly fallen to $26 in the 1st Quarter which represented its lowest point in 13 years. This was due to concerns about a worsening supply glut after sanctions on Iran were lifted, allowing the country to resume oil exports. (Source: http://www.marketwatch.com/story/wti-oil-prices-end-near-a-13-year-low-2016-02-11)

In the second half of the 1st Quarter we saw a sharp turn-around in the markets as global concerns subsided. Global policy easing continued during Q1. The Bank of Japan and European Central Bank eased monetary conditions, although their negative policy rates did not weaken their currencies. The Fed lowered its forward rate-hike guidance to be more gradual and closer to market expectations, which reduced financial pressure on China. (Source: https://www.fidelity.com/viewpoints/market-and-economic-insights/quarterly-market-update

From February 11th - March 31st the stock market had an almost complete reversal and most sectors ended the quarter in positive territory. Non-cyclical sectors outperformed, with telecom, utilities, and consumer staples leading the way. In comparison to the beginning of the year, the S&P500 ended the quarter 3.17% higher, the Dow Jones ended 3.13% higher, and the NASDAQ ended just 0.68% lower. (www.finance.yahoo.com) The price of oil gained 50% from its lows at $26 to end the quarter at $39.07. 

Our approach of active portfolio management versus attempting to be market timers is the preferred method of management, given how volatile this latest quarter was. There continues to be heightened states of volatility moving forward as we closely monitor the markets on a daily basis. If you have any questions about your portfolio investments or the current state of the markets, please do not hesitate to reach out at any time. 


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