Investment Performance

The U.S. presidential election results took many investors by surprise. After an initial overnight

plunge in the futures market, U.S. equities rallied on expectations of a more pro‐business regulatory environment and the possibility of large‐scale fiscal stimulus. U.S. equities may possess greater upside potential post‐election.

Even though the equity markets embarked on a price recovery in the fourth quarter of 2015, most could not erase losses from earlier in the year. In the last month of 2015, the Federal Reserve raised its target rate for federal funds 25 basis points after nearly seven years of near-zero interest rates. US equities embraced the Fed’s tightening in stride, causing the S&P 500 index to rise 7.0% in the fourth quarter. Small Cap Stocks, as measured by the Russell 2000 index, continued to lag large cap equities, appreciating 3.6%. Overall, the Russell 3000 index increased 6.3%.

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.

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

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.

For the second quarter of 2012, US equities declined during the quarter as slowing growth in China and sovereign bond market funding stress in peripheral Europe dampened investor sentiment.

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%.

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.