From a rate-of-return perspective, the quarter was a positive one for most major equity indices. During the 4th quarter stock benchmarks came out of YTD performance “holes” that had been dug for them during the 3rd quarter. In spite of the good fortune during the 4th quarter, most of the equity indices were negative for 2015 as a whole, with the lone exception being the NASDAQ, which advanced 5.73%.
At 12/31 the S&P was officially down 0.73%, making 2015 a flat performance year for the history books. The Dow Jones Industrial Average was down 2.23%, and the Russell 2000 (going deeper) was down 4.41% for the year ending December 31. Not a good year for equities.
All in all, it certainly was a year filled with volatility, fear and uncertainty . . . . attributes that, I am loathe to mention, may be staying with us for the next few years.
Rising interest rates remain on everyone’s mind, very specifically what those increasing rates will do to economic growth in the U.S. and abroad. Having leaped the initial hurdle (i.e. the first rate increase made public by the Fed in almost 10 years), it seems everyone is concerned about when the next increase will come. This approach to life in the equity markets, in my opinion, very much exaggerates the impact that interest rates have on equities. The impact on stocks that was felt after the first Fed move in December, seemed to pale by comparison to the doomsday predictions being made by some on the street. After the dust settled, those same prognosticators were saying . . . the Fed should have increased the rate more than they did. Who holds these people accountable for their predictions? Someone should.
Our advice (which hasn’t changed in -- well forever) is to “buy quality . . . . and hold.” This methodology, predicated on a sound asset allocation plan (appropriate for your investment time horizon and risk profile), has stood the test of time. It takes into consideration the historical performance of the major asset classes, and it assumes you are getting good advice. It also has zero tolerance for market timing, being disciplined enough to know the difference between a trade (short-term / opportunistic model) and an investment (long-term / goal based model).
We wish you the best for 2016. Please let us know if there is anything we can do to help you and your employees take full advantage of your retirement savings plan in the coming year.