As up and down quarters go, the first quarter this year had both the down and the up (in that order) logged. It truly was one for the record books. Year-to-date through February 11th the S & P 500 Index had lost approximately 10% in value. The negative trend was reversed in the l
ast 6 weeks of the quarter, when the index improved close to 12%. The S&P Index closed the quarter up 0.77% from its 12/31/2015 ending price.
The experts agree that those investors who were bullish and long – (“long” meaning that they invest in rather than trade the market) were rewarded by quarter-end with a slight positive return. Those who traded the markets during the quarter probably found themselves lost in a dizzying turnaround that was totally unpredicted.
Contributing to the 1st quarter turnaround were oil’s price recovery, stability in U.S. economic data and an easing of the monetary policy by some of the major central banks worldwide. The U.S. continues to show progress, when compared to the lackluster results of other global markets. Asia was a bright light at quarter-end, but investors in those markets continue to be wary of a return of volatility.
Still on the minds of many investors is the potential for rising interest rates during 2016. The Fed has now gone on record saying that rate increases (if any) would likely be in the second half of the year. The Federal Reserve continues to monitor jobless claims, unemployment rates and the yield curve for possible signs they need to begin rate adjustments. With Japan and the EU looking to continue stimulating their economies with negative rates, the U.S. fixed income market will continue to be the safe haven for yield, which contributes to the demand for U.S. notes, keeping our long-term yields flat.
Our outlook for domestic investments, and as you know we dislike making market predictions, is for a modest gain in the major U.S. indices in 2016. This outlook could be influenced in either direction by a number of occurrences like a strengthening dollar, a dramatic world event or a wild presidential election. I believe it is safe to say that one or more of these are likely to happen, which reinforces the need to be well diversified, and to be very wary of snake oil salesmen.
We remain committed to providing you with the highest quality program for your employees. Please let me know if there is anything that we could do to improve on your plan, or to improve the services that we provide to you and your employees. Thank you for your business, and the confidence that you place in our firm.