The 2015 calendar year will be remembered for the long-awaited first Fed hike in nine years as well as a year of disappointing returns across asset classes, with plunging commodity and oil prices and uncertainty over the pace of China's slowdown being key forces. Painfully, no year since 1990 has seen more negative returns across equity and fixed income indices, oil and gold prices. While losses in 2008 were sharper, losses in 2015 were more broad-based. Despite the poor investment results, the US economy remained a relatively bright spot in the global economy.
Quarterly Commentary 2015
The 3rd quarter of 2015 was marked by heightened volatility spurred by growing concerns over slowing global economic growth. Sharp declines in commodity prices and uncertainty over the magnitude and pace of China's slowdown and the resultant effect on other markets were central points of worry. Emerging markets equities and currencies were especially hard hit. Also, investors remained keenly focused on statements from the Fed in attempts to gauge the timing of the widely anticipated first hike in interest rates since 2006, but the quarter ended with no action.
Global financial markets endured a fitful quarter and finished with a lack of meaningfully positive performances. Global equities posted slight gains across most regions with international small caps being the big winners, at an advance of nearly 5%. Fixed income results were generally modestly negative, with the exception of longer duration bonds dropping sharply. Commodities produced the strongest performance in the capital markets as both energy and agricultural contracts rose sharply and more than offset minor weakness in industrial and precious metals.
Global financial markets were volatile in the first quarter of 2015 with negative returns in domestic equities in January, strong results in February and mixed returns in March contrasted with opposite results in domestic fixed income. For the full quarter, broad equity indices generated positive returns in most regions and styles with U.S. large value being the only area to suffer a loss. Fixed income indices also rose with the lone exceptions being unhedged non‐US bonds and local currency emerging markets debt. Commodities suffered acutely as many contracts fell nearly 10% while REITs continued to post strong results.