Since markets can’t be timed, and are incredibly volatile, it’s of the utmost importance to remain calm and focus on long-term goals. This is precisely what Ron Sloy had urged investors to do on February 9th, in his monthly Market Update Video. Inadvertently enough, the market bottomed out a mere two days later. And while the Dow closed at 15,660 that day, the benchmark moved to 17,685 by the end of the quarter—an increase of nearly 13%, slightly higher than where it started that year.
Below we have listed the 2016 Q1 returns of five major indexes:
BarCap US Agg Bond +3.03%
S&P 500 +1.35%
Russell 2000 -1.52%
MSCI EAFE (Europe) -3.01%
MSCI EM (Emerging Markets) +5.71%
Frankly, these returns barely scratch the surface of the incredibly volatility we experienced this quarter. Take a look at Barclays US Aggregate Bond, which jumps out as the most unusual. Even though the interest rate environment in the last decade can only be described as declining significantly and historically, this index yielded a quarterly return greater than 3% less than 15% of the time. Certainly this return is an indication of the erratic nature of the market. Now that we are beyond the first quarter, this trend is not expected to continue.
There is a shiny bright spot in our portfolios this quarter, thanks to the slight overweight position we have built within the Energy Sector. We have also seen strong leadership in the Emerging Markets, where there is certainly great value. Financials, Technology, and Europe were a disappointment for this quarter, yet there is tremendous value and potential for all three. Be sure to look to gain participation from these allocations as the year progresses. The markets, we believe, have bottomed out this year—equity portfolios, as such, still may achieve double digit returns. Continued volatile behavior, however, is expected. Stay focused, calm, and patient. You will be rewarded.
As usual, there is one important lesson to gain from this: markets can’t be timed. Be aware of your time horizon and risk tolerance, and chose asset allocations to match. Most of all, stick to your long term goal, both through the ups and the downs.
Thank you for continuing to support us. We appreciate your confidence. As always, please contact us directly if there is anything we can do to help.
Sloy, Dahl & Holst, Inc.