Fourth Quarter 2015 Capital Markets Update

Last Updated: January 21, 2016

Equity markets remained volatile during 2015’s 4th quarter, moving substantially higher to erase the significant losses from Q3. While most of the economic conditions were unchanged from the prior quarter, markets flipped to the “glass-half-full” mindset.
2015 Q4 Capital Market Returns Weakness in China continued following the surprise Chinese de-valuation of their currency, the yuan. This made exports from the U.S. and other countries more expensive, and was designed to aid Chinese exports.  Oil continued its downward trajectory, ending the year at multi-year lows.  We expect this volatility to continue as companies report 4th quarter results and provide their 2016 outlook. Investors remain concerned about the pace of future Fed interest rate increases, slower global growth, and weaker-than-expected U.S. corporate earnings. Major U.S. equity indexes posted positive returns for 2015’s 4th quarter[1], bringing the full year returns back to slightly positive.  The Dow Jones Industrial Average Index returned 7.70% for Q4 and 0.21% for the year. The broader S&P 500 Index returned 7.04% in Q4 and 1.38% for the full year. The technology heavy Nasdaq Composite Index returned 8.38% in Q4 and 5.73% for all of 2015. Foreign markets again lagged their domestic counterparts. Concerns over growth in China, growth in the European Union, continued unrest in the Middle East, and strength in the U.S. dollar were all drags on foreign equities. The non-U.S. equity market for developed countries, as measured by the MSCI EAFE USD Index, returned 4.71% for Q4 and -0.81% for the year. Emerging market equities, as measured by the MSCI EM USD Index, which are more sensitive to an increase in interest rates, managed 0.66% for Q4 but lost -14.92% for all of 2015. Fixed income markets remained attractive for investors wanting less risk in “safe havens” like U.S. Treasury securities. The broad-based Barclays U.S. Aggregate Bond Index returned -0.57% for the 4th quarter and 0.55% for the year. Riskier bonds, as measured by the ML US High Yield Master II Index, continued to be harmed by energy companies and returned -2.17% and -4.64% for Q4 and year respectively. We believe investors should review their portfolios at least once per year to determine if the mix of equities, fixed income and cash in the portfolio remains appropriate. Recent market activity may have caused portfolios to become out-of-balance compared to the investors’ risk appetite. This imbalance compared to the original portfolio intentions should cause investors to revisit their portfolios and rebalance as necessary. Our Investment Services team can help identify investment funds that are in-line with your retirement plan goals, while mitigating risk. To learn more, contact a Pension Consultants Investment Consultant at 800-234-9584 or email Investment Services Team.
[1] Source: Index Returns as of 12/31/2015,
Disclosure: Past performance is not indicative of future results.
PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.


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