Market Commentary
3Q 2015
I confess to struggling to write this quarter and year-end capital markets letter. The financial sections of numerous publications are already filled with recaps of 2015 and 2016 forecasts. One can easily find statistics and headlines of what happened in 2015 ... fighting in the middle east, the debt crisis in Greece and China's surprise devaluation of its currency. These are some of the events that resulted in the Dow Jones Industrial Average finishing at 17,425, down 2.2% for the year. The S&P 500 did slightly better ending at 2043, down .73% in 2015. The Russell 2000, which measures small capitalization U.S. stocks, completed the year at 1135, off 5.7% for the year. It is well known and old news that the Federal Reserve Open Market Committee lifted interest rates by ¼% in early December. The NASDAQ Composite, which measures numerous technology stocks was one of the very few bright spots in 2015 advancing 5.7% in 2015 to finish at 5007.
Now that 2015 is history we turn our attention to 2016. Even though we just entered 2016, world news is affecting the U.S. markets and creating more uncertainty and volatility. China is again in the news as is conflict in the Middle East. We have reviewed the Congressional Budget Offices, Economic Update to the Budget and Economic Outlook report,https://www.cbo.gov/publication/45066, which projects Gross Domestic Production (GDP) growth of approximately of 3.0% in 2016. We have read the Federal Reserve Bank of New York's U.S. Economy in a Snapshot. We know the forecast for operating earnings of the S&P 500 firms to be $130, which would suggest upside potential for share prices. We have reviewed the labor reports on employment and reviewed the inflation expectations. All of this data suggests the U.S. economy will continue to expand in 2016, yet consumer sentiment is at lower than expected levels and world events are creating fear in the financial markets. Are we all just a little bit stuck asking ourselves:
However, should we also consider:
I recently heard a sermon by the Reverend Steven Jester of Second Presbyterian Church in Louisville, KY. The sermon was titled "Be not afraid" and the message has encouraged me to move forward with optimism. While events out of our control influence the financial markets, we can trust in the One that is ultimately in control. Here is a link to the Dec. 13, 2015 sermon: http://www.secondpresbyterian.church/sermons/2015-sermons/ Best wishes for a wonderful 2016! Tim Clark Chief Operating Officer |