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In Your Best Interest: Our Q4 2015 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.

Market Highlights: Q4 2015

The Force Awakens” was the theme in 2015—on the big screen and in real life. Just as the characters in Star Wars were forced to face their old rivals, global conflicts increased around the globe and the market reacted. Economic stress in Greece and China, falling oil prices, and terrorist attacks in Paris and San Bernardino, CA, impacted equity markets worldwide.

Of all the stock indexes, only the NASDAQ posted a gain for 2015. The S&P 500 index of large US companies ended with the first down year since 2008 while smaller and riskier US companies lost 5.7%. Developed international companies were down 3.3% despite a strong Q4, commodity-dependent Emerging Markets lost 17% for the year as oil prices reached an 11 year low, and bonds prices fell in the quarter as Treasury yields increased. 

When you look at your year-end statement, you may see that portfolio values trailed the Dow and the S&P 500. The reason? A diversified portfolio includes non-correlated assetsstocks that go up or down at different times—including energy and commodity stocks that fell due to low oil prices. Americans are smiling at the gas pump, but their portfolios are feeling the hit. Bonds investors were also disappointed as higher quality, short-term instruments that often provide defense against lower stock prices delivered less-than-expected yields.

Clearly it’s good to be an investor when you stay disciplined and stay the course. Despite the flat numbers, the three- and seven-year annualized returns of the S&P 500 were 12.7% and 12.4%, respectively, and the MSCI EAFE delivered 2.3% and 4.7% in the same timeframe. And remember, while the price of equities declined in 2015, you did not lose value. To restate Benjamin Graham’s advice to Warren Buffett, “Price is what you pay, value is what you get.”

On another positive note, at the end of December, the Federal Open Market Committee raised interest rates .25% for the first time since 2006. The increase reflects the Fed’s view that the US economy is strengthening, and their decision was based on positive economic data: unemployment ended the year at 5.0%, GDP growth slowed to 2.0%, and inflation remained below the Fed’s 2.0% target.

So what will 2016 hold? The only thing we can predict with any degree of certainty is that the US will have a new President. Bull market or bear market, no one knows. Investors should certainly expect continued volatility in equity prices, but as I’ve said time and again, the market is always headed in one direction: up. Our strategy is a disciplined approach to capital markets—staying diversified, keeping costs low, managing taxes, and rebalancing when needed—and we will continue to work with you to align your investment approach with your life goals, whatever they may be.

There’s no doubt the world is changing at a record pace, and it may feel like your life and goals are changing just as fast. The Force has indeed awakened, but we’re always here to help…no matter what the universe throws our way in the future.

 

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Disclosure

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >