Again, it is easy to draw similarities between 2011 and 2015 - too many sectors of the global markets were in the negative. Conventional tactics of diversified investments and value buys were not much help to anyone last year, yet we submit that these investments simply haven’t realised their potential - something we expect to happen in 2016. We believe that those who practice patience will see the most gains in 2016.
Listed below are the year-end returns for five major indexes:
BarCap US Agg Bond + 0.55%
S&P 500 + 1.38%
Russell 2000 - 4.41%
MSCI EAFE (Europe) - 0.81%
MSCI EM (Emerging Markets) - 14.92%
The main culprits responsible for the volatility in Q3 were fear of global sluggishness (especially in China), and uncertainty of the Federal Reserve’s decision on a rate hike. However, we view the recent pullback as a pause in the ongoing bull market and that we will very likely realize the DOW reaching 20,000 at some point in 2016. We also see clear opportunities within Health, Energy, Financials, Technology, Europe and the Emerging Markets being presented. To reiterate, we believe it’s very likely that continued patience will be required to have a successful year in 2016. Furthermore, it is important to remember that good investment opportunities are rarely realized immediately, even if instant gratification is something we seek.
The S&P 500, while it trailed other major global indices halfway through 2015, has been the leader for six years. Once volatility in China picked up it again regained its place at the top. Sloy, Dahl & Holst will almost always have the majority of our equity positions within the U.S. However, we’re looking for new leadership from international markets in the coming years. Keep in mind that the S&P 500 was negative for a decade, from 2000 – 2010. Global diversification is very important over the long-term.
As always, please feel free to contact us directly if there’s anything we can do to help.
Sloy, Dahl & Holst