The third quarter of 2015 brought turmoil to many asset classes around the world amid concerns over global growth and the timing of the Federal Reserve’s first rate hike since 2006. Investors reacted to this uncertainty. Perceptions of risks rose and volatility spiked. As a result, the S&P 500 index declined 6.4%, Small Cap Stocks, as measured by the Russell 2000 index, dropped 11.9%, and the broader Russell 3000 index lost 7.2% for the quarter. For the 1-year period ended September 30, 2015, these indexes returned -0.6%, 1.2%, and -0.5%, respectively.
Many forecasters, including those at the Federal Reserve and the International Monetary Fund have repeatedly overestimated the economy’s strength, both in the U.S. and around the globe. They’ve predicted faster economic growth than has occurred. Extended valuations, the decline in corporate earnings, and investor’s sentiment in the European markets have slowed the U.S.
A very strong August for the market was bookended by weak performance in both July and September. Investors are grappling with the ramifications of improving economic conditions in the U.S. that are leading to a wind down of Federal Reserve accommodative policy. While good news, it comes at a juncture where stock valuations on the whole already reflect the fact that we are more than 5 years into this bull market. Concerns about weaker global economic growth have led to a sudden strengthening in the U.S.
There is a growing realization that monetary policy on an extraordinarily easing mode can have negative effects on risk taking and how that will get recalibrated over the next two years as policy makers move to normalization. The good news has been in U.S. job growth. Despite lower than expected GDP stats for the first quarter, the labor market in the U.S. seems to have moved to a firmer footing.
The S&P 500’s bull-run marked its fifth anniversary in February this year. Over this time period, global equity markets have endured a near collapse of the Eurozone, serious and ongoing geopolitical issues, and sluggish GDP and corporate revenues. None of these concerns have been sufficient to derail the liquidity-fueled equity markets. However, the return of frostier relations between the West and Russia, talk of an emerging tech bubble, and uncertainty relating to the end of quantitative easing, has left investors feeling a sense of unease as markets progress into 20
The stock market finished 2013 with its biggest annual gain in over a decade—up over 30%—and also marked its fifth consecutive annual gain. Whereas one year ago investors were concerned about the “fiscal cliff” and whether the economy could avoid a double-dip recession, inputs now support the view that economic growth will sustain itself and likely improve in 2014. The Federal Reserve has also made headlines with various announcements about the gradual withdrawal of quantitative easing. While this is likely to drive further volatility, the positive background is that the U.S.
The discussion about a potential tapering or slowing down of the Federal Reserve’s latest quantitative easing program led to a pull-back in the major indices. Concern over the Federal Reserve’sintention to reduce its quantitative easing program caused a rout in the fixed income markets. In two short months, the yield on the 10-year Treasury note jumped 80 basis points, steamrolling bond prices along the way. The Barclays Capital Aggregate returned -2.3% for the quarter and -0.7% forthe year.
U.S. equities surged during the quarter, with many of the broader U.S. indices up low double digits. Many of the improved macroeconomic conditions have been aided by the Federal Reserve’s continued accommodative interest rate policy, and with inflation below its 2% target and unemployment well above its 6.5% objective. The S&P 500 index rose 10.6% for the first quarter of 2013, while the DJIA and NASDAQ returned 11.9% and 8.2%, respectively.
Heightened fears over the U.S. fiscal cliff outweighed numerous positive indicators in the fourth quarter of 2012 as the S&P 500 index fell 0.4%. The decline occurred despite the resolution of U.S. elections and the Federal Reserve’s commitment to keep its target interest rate near zero and buy U.S.
Fears over the U.S. fiscal cliff and a pronounced slowdown in China have limited upside gains in risk markets in the wake of the quantitative easing throughout the developed world. The Federal Reserve announced QE3, which allows for unlimited MBS purchases, until the labor market improves.
For the first quarter of 2012, US equities generated another quarter of double-digit returns as additional liquidity-boosting measures from global central banks and improving US economics strengthened risk appetite. The NASDAQ improved 18.7%. The DJIA and S&P 500 increased by 8.8% and 12.6%, respectively. Emerging markets fared better than developed markets. The MSCI Emerging Market rose 14.1%. For the bond markets, the Barclays Capital Aggregate gained 0.30%
For the fourth Quarter, US Stocks performed better than their international and emerging markets counterparts. The DJIA outperformed the S&P 500 and NASDAQ, posting returns for the quarter of 12.8%, 11.8% and 7.9% respectively. The MSCI EAFE was up 3.4 % and MSCI Emerging Markets was up 4.5%. Amid market uncertainty, bond markets remained in favor, with the Barclays Capital Aggregate gaining another 1.1% in the fourth quarter, closing the year with a gain of 7.8%.
Worldwide equity markets faltered in August and September, closing their worst quarter since the collapse of Lehman Brothers in 2008. Investors’ flight from equity was driven by uncertainty surrounding the debt crisis (Sovereign) in Europe, potential inflation and slowing GDP in Asia, and double-dip recession fears domestically. The Dow Jones Industrial Average fell -11.5%.
The overall markets were flat for the 2nd quarter. The Dow Jones Industrial Average returned 1.4%. The Standard & Poor’s 500 and NASDAQ stock indexes were mixed, up 0.1% and down -0.3%, respectively. The MSCI EAFA was up 1.6% and Emerging Markets (EM) decreased -1.1%. The markets began to react negatively to often‐contradictory economic indicators and the ensuing heightened volatility, experiencing a steady slide through most of the quarter. In addition to social unrest in Greece, the second quarter witnessed continued supply chain issues as a result of the earthquake in Japan.
Alameda County Employee Retirement Association (ACERA)continues to monitor capital markets very closely. The Dow Jones Industrial Average returned 7.1% during its best first quarter in percentage terms ins 12 years. The S&P 500 and NASDAQ stock indexes were up 5.9% and 4.8% respectively, for the quarter ending March 31, 2011.The MSCI EAFA was up 3.5% and Emerging Markets (EM) increased 2.1% over the same period. The quarter was not without its problems: the European debt crisis continues to simmer; the U.S.