Investment Commentary
The list of investor-unfriendly headlines in the first month of 2016 was a long one that started with an apparent H-bomb test by the North Koreans and included weak economic reports from China, plummeting oil prices, and contracting corporate profits. Add increased presidential election uncertainty and there were ample drivers of renewed market volatility.
Global stocks fell by 6.0% (MSCI All World Index) in January, actually recovering in the final two days from a steeper mid-month decline. Concurrently, oil prices continued their free-fall (WTI Crude -9.3%) and bonds edged up (Barclays Aggregate + 1.4%) as investors gravitated to their safety.
Despite the contraction of corporate profits (which are largely driven by the decline in energy prices) and slowing growth in China, the threat of recession in the United States seems muted. Leading Economic Indicators are still positive, global central banks are still extremely accommodative (investor-friendly) and consumer spending remains strong - likely to be further fueled (no pun intended) by the decline in oil prices. This is not to say that markets will not remain volatile in light of continued Chinese weakness but simply a reminder that domestic economic health remains positive.
We encourage you to call or email us if you have any questions about the markets or your portfolio. As always, you can reference the RPG Monthly Market Snapshot by clicking here for some key economic data points and index returns.
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