With Q1 2016 in the review mirror, let’s look back to see what transpired. On the Global Macro front we saw a lot of moving parts. The Central Banks in Europe and Japan are experimenting with negative interest rates. A central bank has never before implemented a negative interest rate policy. They are trying to get money circulating through the economy and ultimately increase inflation. After printing large amounts of money, most have pooled in banks and financial assets. The central banks are trying new ways to get the money into the hands of everyday consumers. Roughly 25% of the global GDP is now in a negative nominal interest rate environment. Meanwhile in the US, the Federal Reserve is plotting a path for further increases to interest rates this year. Many commodities slowed their slide in prices during Q1, fueling rebounds in emerging markets and commodity based securities.
Source: Index Returns as of 03/31/2016, Morningstar.com
2016’s first quarter started off just behind the Great Depression in regards to Equity market losses. US recession talks heated up in January and continued into February. But once commodities found a floor in early to mid-February, it was off to the races in Equities. The S&P 500 returned 1.35% for the quarter. Talk of a recession faded as equities climbed upward. Foreign Industrialized stocks fared much worse than their US counterparts, with the MSCI EAFE NR returning a negative 3.01% for Q1. Its trend down and back up was similar to the US equivalent, but the drop down was much steeper, and the climb back up was not enough to pull out of the red for the quarter. Q1’s bright spot was undoubtedly the Emerging Markets. The commodity stabilization helped to power this asset class to a 5.71% gain for the quarter.
On the Fixed income side, Q1 was not as dramatic. There was a noticeable uptick in the high yield space through the first quarter as sentiment shifted, with the BofAML High Yield Master II returning 3.25%. The Government Bond space saw very positive returns during the first part of the quarter, due to the high demand for Treasuries. The Barclays US Aggregate Total Return closed Q1 with a return of 3.03%, highlighted by the rally in Treasuries.
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 top performing in regards to your retirement plan goals, while mitigating risk. To learn more, contact a Pension Consultants Investment Consultant at 800-234-9584 or contact us here.
Disclosure: Past performance is not indicative of future results.160414-1
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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