Quarterly Market Review 1Q2016

April 21, 2016

 

Click here for full transcription.

 

 

It's been a wild ride this quarter. Let me share with you our view of what's going on, both in the past quarter and for the remainder of 2016. Hello, my name is Paul Carroll. I'm the CEO and founder of Efficient Wealth Management, a boutique wealth management firm based here in The Woodlands, Texas. 2015 was a weak year for asset markets, as volatility returned with a vengeance. 2016 started with a strong sell-off, creating a headwind for performance for the rest of the year. In fact, it was one of the worst starts in market history. Despite the sell-off, the US dollar remains strong, further depressing international equity valuations. 2015 appears to have been a capitulation year for commodities, energy and emerging markets. It was a horrible year for disciplined asset allocators. Having said that, there's blood in the streets, and opportunities are finally beginning to present themselves.

                                                             

This past quarter, we saw a strong recovery in commodity markets from extreme end-of-year lows. We've been fortunate, and we would not only harvest significant tax losses in this asset class, but it's still well-priced for future investment. Here in Texas, it's all about energy now. Clearly, current energy prices are priced into the markets. The good news is that for those who can hang in there, we're looking at some great valuations in the sector. For bond investors, the yield curve is moving. Yields are rising in the five- to 10-year stretch, justifying our strong bias on the short end for the past year or so. We may be modifying a bond mix in light of these yield curve changes. It's human nature to extrapolate a continuation of recent history. However, this quarter proved how often human nature can be wrong, presenting us with a strong rally in a number of asset classes. It's also reinforced the importance of a well-managed asset allocation, especially after a period of generalized asset underperformance like 2015.

 

It's human nature to extrapolate a continuation of recent history. This quarter proved how often human nature can be wrong, by presenting us with a strong rally in a number of asset classes. It's also reinforced the importance of a well-managed asset allocation, especially after a period of generalized asset under-performance, like 2015. I wish you all the best of investing success.

 

 

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