The first quarter of 2016 imprints the best quarterly rebound for U.S. stocks following 1933. Falling more than 11% to begin the year, both the Dow Jones and S&P 500 managed to climb back to the positive domain before the end of March. More than anything, this demonstrates you can't time the markets. This was the second pullback of more than 10% in six months, weighing on investor confidence. Right as it felt the market may be out of control, we bounced right off the bottom set last August and immediately moved higher.
Ron Sloy posted his quarterly Market Update video on February 9th, asking investors to remain calm and concentrate on their long term objectives. As chance would have it, the markets bottomed two days with the Dow closing at 15,660. From that point to the end of the quarter the benchmark moved about 13%, closing at 17,685; marginally higher than where it began the year.
Listed below are 2016's first-quarter returns of five major indexes:
BarCap US Agg Bond +3.03%
S&P 500 +1.35%
Russell 2000 -1.52%
MSCI EAFE (Europe) -3.01%
MSCI EM (Emerging Markets) +5.71%
These returns are not necessarily indicators of the volatility experienced all through the quarter. The one number that truly stands out is the Barclays US Aggregate Bond index. Indeed, even in the noteworthy and memorable declining interest rate environment we've encountered this last decade, this index has yielded a quarterly return more prominent than 3% under 15% of the time. This return was caused by instability in stocks, yet now that we're past the first quarter we don't anticipate that the pattern will continue.
We created a slightly overweight position inside the Energy sector throughout the first quarter, which was a strong point in our portfolios. Additionally we’ve seen some good direction from the Emerging Markets, where we see great value . The three sectors that were setbacks were Financials, Technology and Europe. We see excellent value and potential for every one of the three, and hope to pick up support from these areas as the year advances. We trust the markets have set a low for the year and that equity portfolios still have the likelihood of strong returns. Although, lingering volatility should be assumed. The investors who remain calm and patient will be compensated.
Interest rates, performance numbers, and investment themes aside, there's one lesson that is most imperative from this quarter; you can't time the markets. Investors need to pick investment strategies that match their risk adversity and timelines. What’s most important is, investors should maintain their long term plan through the ups and downs.
We thank you for your continued confidence and backing. As always, please don't hesitate to reach out to us directly if there's anything we can do to offer assistance.