|
|
|
|
Market Commentary
Just like in 2015, the first quarter of 2016 was anything but calm. Within the first 45 days of the year, we saw the Dow Jones, S&P 500 and MSCI EAFE drop rapidly, falling -10.13%, -10.51% and -12.5%, respectively. However, over the next 45 days, the same indexes were up 12.93%, 12.61% and 11.25%. The first quarter proved that in order to achieve optimal results, investors need a disciplined approach to avoid emotional reactions.
In the short term, markets can act irrationally, leading investors to sell off stocks for illogical reasons. But history and statistics show that those who stay disciplined, patient and focused on their long-term objectives will be rewarded. Remember, panicking is not a strategy.
Moving Forward
We continue to expect 2016 to be a year in transition as central bankers around the world execute differing monetary policies; as oil and dollar prices continue to find their equilibrium; and as political uncertainties remain throughout the world.
In the United States, concerns about global economic weakness and tightening financial conditions prompted the Federal Reserve to delay further rate hikes and lower their internal forecast from four 25 basis points (0.25%) rate hikes in 2016 to just two. This new stance in policy has provided some momentum in the markets as it has eased fears of the Federal Reserve raising rates too quickly and restricting growth.
Speaking of growth, the labor market in the U.S. continues to be quite strong. In fact, since 2010, the U.S. has created more than 14.4 million jobs, increasing job creation in every sector except government. Furthermore, our unemployment rate has been cut in half since October 2009, going from 10% unemployment to around 5%.
With the Federal Reserve slowing the pace of interest rate hikes, continued growth in our labor markets, and low gas prices, consumers should continue to help our economy chug along, albeit at a slow pace, as consumer spending accounts for a majority of U.S. GDP.
International Markets
International markets had an equally rough start to the year, as central banks in the Eurozone and Japan continue to deploy more accommodative monetary policy. In addition, countries throughout the world have continued experimenting with negative interest rates (NIRP). Currently, more than 10 countries have negative interest rates. In fact, we read about a family in Denmark with a negative mortgage rate, meaning, they were actually RECEIVING monthly payments from the bank! Also, the emerging world is continuing to deal with the repercussions of China’s transition from an industrial economy to a more consumption-based economy. Over the long term, we believe this transition is healthy for China’s stability, but there is likely to be more uncertainty ahead as the country stumbles through the process.
In closing, expect more volatility in the months to come as we still have many unknowns throughout the world and global growth remains modest. Although we continue to believe we are in the latter stages of this business cycle, we still feel the likelihood of a recession this year is low. As always, we are navigating through the noise to make long-term, sound investment decisions in your portfolios.
|
|
Market Forecast Contest
Left to right: John Phillips, Leland Gupton, Judy Gupton and Fred Hiatt
For those who participated in Red Door’s market contest, the results are in! As a reminder, we reached out to all clients in early May 2015 before our Red Door party requesting that each person fill out an entry form. The goal was to predict the future value of the S&P 500, 10-Year U.S. Treasury, price of gold and price of oil as of market close on March 31, 2016. Here were the average forecasts across our entire client base versus the actual results:
Average Client Percentage
Forecast Actual Results Miss from actual
S&P 500 2,255 2,059 8.7%
10-Yr Treasury 2.35% 1.79% 23.8%
Gold 1,304 1,233 5.4%
Oil 74.32 38.11 48.7%
Overall, our clients are an overly optimistic crew, which is always great to see! The average participant’s forecast overshot on every asset class, and no one was close to predicting the price of oil (missing it by roughly 50%). Don’t feel bad; professional economists and investors didn’t see that one coming either!
The 2016 winners of the Red Door Market Forecast and a $500 gift card were Judy and Leland Gupton. Congratulations!
We will be making this an annual event, so please use this email as a notice to send in your 2017 market forecast. We will be using the March 31, 2017, closing values, so please email your predictions to Gretchen@reddoorwealth.com. Here are the items you should fill in:
S&P 500 =
10 Yr Treasury (yield) =
Gold (ounce) =
Oil ($bbl/wti) =
Tiebreaker: Price of unleaded 89-octane gas at Shell Station on Poplar Ave. and White Station Rd. =
|
|
|
Disclaimer
This communication and its content are for informational and educational purposes only and should not be used as the basis for any investment decision. The information contained herein is based on publicly available sources believed to be reliable but not a representation, expressed or implied, as to its accuracy, completeness or correctness.
No information available through this communication is intended or should be construed as any advice, recommendation or endorsement from us as to any legal, tax, investment or other matters, nor shall be considered a solicitation or offer to buy or sell any security, future, option or other financial instrument or to offer or provide any investment advice or service to any person in any jurisdiction. Nothing contained in this communication constitutes investment advice or offers any opinion with respect to the suitability of any security, and has no regard to the specific investment objectives, financial situation and particular needs of any specific recipient.
This email represents the opinion of Red Door Wealth Management and is for informational purposes only. It is not a recommendation nor is it intended to be construed as tax or legal advice by the recipient. Past review of investments are no guarantee of future results.
|
|
|
|
|
|
|
|
|
