We hope our note finds you and your family doing well and enjoying the New Year. As we wrap up 2015, we consider it a good time to reach out and recap the past year, as well as share our thoughts looking ahead into 2016.
As you know, 2015 has been a challenging year across the board for the markets. This year we have endured a near Greek exit from the Eurozone, Russian aggression, multiple acts of terrorism, the Chinese stock market crash, global slowing, plunging oil and a surging dollar.
Nine of fifteen asset classes posted negative returns for the year, something we haven’t seen since 2008. Oil led the underperformance, down more than 30% as the sector battled collapsing oil prices on the heels of slowing demand and high production levels. Low quality sectors of the bond market experienced declining prices tied directly to energy performance. Emerging market performance continued to lag this year, led by weaker growth in China and slowing demand across the entire space. Municipal bonds provided a bright spot in the market, but with a modest return of just over 2% for the year.
We saw the Dow and S&P 500 make numerous up-or-down moves of more than 1% during a trading day. In fact, the Dow posted 70 sessions with swings to that degree, nearly twice the count of last year and much higher than we have experienced in the last 4 years. The increase in volatility this year has been nothing short of incredible—yet the market still has a heartbeat.
We don’t think the markets are as dire as the media would have us believe. The Fed has instituted a much anticipated “lift-off,” raising rates for the first time in nearly ten years. This is an affirming signal, proving the US economy is stronger than headlines tout. National growth is continuing at a steady pace, unemployment levels are low and expected to go lower, consumers are strong and increasing their spending, and we see few to no inflationary pressures at this point.
Non-US developed markets are still in the early stages of recovery, but countries are being quite supportive in their monetary policy. And even though the growth in China’s demand has slowed, it’s still increasing at a robust clip of 6-7%, which is much faster than the rest of the world.
As we look ahead, we expect to see many trends from this year spill into 2016. We believe there will be a lot of volatility in the markets, and returns will be below their long term historical averages. We expect the Fed to take a slow and shallow approach to raising rates—putting thoughtful consideration into the overall health of the US economy and overall global factors.
We continue to believe US equity markets will be a top performing asset class and international markets remain attractive given their relative value and positioning in the business cycle. Our main focus continues to be diversification of risk and investing for the long term.
Your future is of the upmost importance to us at CGC Financial. We look forward to meeting and hearing from you throughout 2016, and take pride in servicing your financial needs.
2 Source: Yahoo Finance
 Source: The World Bank: Global Economic Prospects, June 2015