Year in Review to Q3 2015 by Sloy, Dahl & Holst, Inc.
November 2, 2015
The recent third quarter of 2015 was the worst performing three-month period for the markets in four years. From top to bottom the S&P 500 dropped more than 11%, providing the first pullback greater than 10% since the third quarter of 2011. Although market volatility is unsettling, please bare in mind that corrections are a natural function of a healthy market.
Listed below are returns for five major indexes through September 30th:
BarCap US Agg Bond + 1.13% S&P 500 – 5.29% Russell 2000 – 7.73% MSCI EAFE (Europe) – 5.28% MSCI EM (Emerging Markets) – 15.47%
The volatility in third quarter was driven primarily by two events; fear of slow down in global growth (especially in China) and the uncertainty of a rate hike by the Fed. However, we think the recent pullback is simply a pause in the ongoing bull market run and that we’ll very likely see the DOW reach 20,000 at some point in 2016.
Third quarter corporate earnings expectations have been lowered to such an extent that we believe there will be many upside surprises. The U.S. economy is performing better than people think, the European economy is growing, and the Emerging Markets (especially China) are still outpacing the developed world. The housing and auto sectors remain strong and we are seeing stabilization in energy. We think a rate hike in December is still imminent, which in our opinion would be positive for the financial markets. We continue to like the following sectors: Financials, Energy, Health, Technology, Europe and the Emerging Markets.
October has begun with a nice bounce, but we predict that volatility may ensue. By year-end, however, we believe the markets will reflect a positive return.
We want to be the first to wish you and your family a wonderful, happy, and healthy holiday season.
As always, please feel free to contact us with any questions or concerns.