View from the Chair: Windermere's Market Outlook (March 2016)

Markets continue to present a challenging road for investors.  Large daily (and intra-day) swings were the norm, with ten days in which the Dow Jones Industrial Average moved more than 1% .  However, in the end, equity markets were only down slightly on the month and fixed income produced marginally positive returns. 

Click on the table for highlights of asset class returns for the month

We continue to observe an overwhelming sense of pessimism about global growth and the economy.  And as we shared last month, until we reach clarify on the factors we’ve once again outlined below, markets are likely to continue their choppy movements.  

·      Energy – the price of oil remains at depressed levels and equities and energy continue to trade in lock-step.  The supply & demand equation for oil (and many other commodities) needs to reach stability.  This will take time but as certain marginal producers go off-line and there is additional consolidation, we should see less movement

·      China - there is an endless loop in the media concerning the world's largest country and its slowdown.  Keep in mind China is in the midst of a major transition from a commodity using/infrastructure building economy to a consumer driven economy.  With a 2015 growth of 6.9% and a middle class population that is growing every day, the country is far from stagnant but needs time to work thru this pivot point

·      Interest rates - The US Federal Reserve raised interest rates in late 2015, and almost instantaneously, the chatter began surrounding when and if the Fed will raise rates again in 2016.  Why the debate?  While unemployment metrics are improving (which would be a reason to raise), many factors point the other way (slowing growth, other countries staying accomodative, strength in the US dollar).  Yet as equities have weakened this year, interest rates are on the decline – again.

·      US Dollar - Uncertainty in foreign markets and increasing interest rates in the US have once again increased demand for US dollars.  Great news for US citizens traveling abroad but bad news for US exporters and US investors in international markets.

·      Presidential Race -  The presidential race is in full swing and it is an election cycle like nothing we have every seen before.  This is causing a high level of uncertainty which is a headwind for markets.

What does all of this mean? What do you do now?  Keep "driving on" with your investing.  Trust in the underlying strength of the country and the world and realize markets have been through times like this before and will again in the future.  As the saying goes, there is a reason why rear-view mirrors are so small and windshields are so large.  Reflect on the past but focus forward - and keep on driving.

We thank you for your ongoing support and rest assured – we constantly strive to provide  attractive risk adjusted returns for our clients.