April 2016 Financial Markets Summary
“I can’t get no satisfaction. ‘Cause I try and I try and I try and I try. I can’t get no satisfaction. When I’m drivin’ in my car, and that man comes on the radio, he’s tellin’ me more and more about some useless information, supposed to fire my imagination. I can’t get no satisfaction.” The lyrics to Keith Richards’ (Rolling Stones) 1962 song seem eerily appropriate as we try to make sense of the markets, the economy, and…heaven forbid…politics. Schwab’s Liz Ann Sonders called the current bull market “the most unloved bull market in history.” That certainly has not changed. Last month’s huge market gains did nothing to quell investors’ unease. If a 7% one-month gain (see the numbers below) doesn’t spark enthusiasm, what will?
The Wall of Worry seems to grow whether the markets go up or down. One commentator suggests it has a lot to do with the average voter’s “Oh, no” reaction to the top four presidential contenders and how the markets will respond. Another says it has more to do with the barrage of depressing international news we are fed each day. Despite all of this, world markets turned what looked to be a depressing first quarter into one that ended remarkably well. It’s been a real-life instance confirming that today’s headlines and tomorrow’s reality are seldom the same.
The energy sector, reflecting oil’s 40% price rebound, led the way in March, followed by emerging market stocks, and real estate. Domestic and international dividend-paying stocks have turned positive and are once again providing leadership. Markets remained positive the last week of the quarter, even with oil prices slipping a bit. Is this the start of a de-coupling, or just a tease? Another curiosity that has gone largely unreported has been a decline of the U.S. dollar against most other major world currencies. The Fed’s reluctant decision to hold rates steady and its cautious economic outlook added to the dollar’s decline. It seems the planned liftoff of interest rates from zero is more difficult than expected. We wonder if Janet Yellen has been reading Charlie and the Chocolate Factory. “This isn’t just an ordinary up-and-down lift!’ announced Mr. Wonka proudly. ‘This lift can go sideways and longways and slantways and any other way you can think of…you simply press the button… and zing!…you’re off!” This liftoff looks fragile and uncertain, and most definitely harder than pressing a button.
So what should we expect going forward? Historically, pessimism like we have now has been good for future returns. Does history matter anymore? We believe volatility will continue, which means investors must exercise patience. As we noted last month, the importance of a long-term, diversified investment strategy is huge. Protect the income you need from your portfolio over the next 3-5 years. In the meantime, take some satisfaction from last month’s positive numbers.
|Asset Index Category||Category||Category||Category||10-Year|
|1 Month||3 Months||2015||Average|
|Dow Jones Industrials – Large Cos||7.1%||1.5%||-2.2%||4.8%|
|S&P 500 Index – Large Companies||6.6%||0.8%||-0.7%||4.8%|
|S&P 400 Index – Mid-Size Companies||8.3%||3.3%||-3.7%||6.2%|
|Russell 2000 Index – Small Companies||7.7%||-1.9%||-5.7%||3.8%|
|MSCI EAFE Index – Developed Intl.||6.0%||-3.7%||-3.3%||1.8%|
|MSCI EM Index – Emerging Markets||13.0%||5.4%||-16.4%||0.6%|
|Short-Term Domestic Bonds||0.8%||0.9%||0.2%||2.9%|
|Global Government Bonds||2.7%||4.2%||-3.9%||4.3%|
|Bloomberg Commodity Index||3.8%||0.4%||-24.6%||-6.2%|
|Dow Jones U.S. Real Estate||10.4%||5.1%||2.1%||6.1%|
|World Allocation Global stocks, bonds, commodities||4.7%||1.0%||-4.4%||3.1%|
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment, strategy, or product or any non-investment related content, made reference to directly or indirectly in this newsletter, will be suitable for your individual situation, or prove successful. This material is distributed by PDS Planning, Inc. and is for information purposes only. Although information has been obtained from and is based upon sources PDS Planning believes to be reliable, we do not guarantee its accuracy. It is provided with the understanding that no fiduciary relationship exists because of this report. Opinions expressed in this report are not necessarily the opinions of PDS Planning and are subject to change without notice. PDS Planning assumes no liability for the interpretation or use of this report. Consultation with a qualified investment advisor is recommended prior to executing any investment strategy. No portion of this publication should be construed as legal or accounting advice. If you are a client of PDS Planning, please remember to contact PDS Planning, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives. All rights reserved.