Integra Financial 4th Quarter 2015 Market Performance & Economic Outlook

The market performance for this last quarter is one I would like to forget. If you have been listening to the business news you have heard two major themes. The markets have been “volatile” and the “Fed may raise interest rates”. The market performance year-to-date has gone negative because of events in August. The Morningstar U.S. Total Market return YTD is -5.3% with Large Caps down -7.75%, Mid Caps -6.54%, and Small Caps -11.11%. What caused this to happen? In a nutshell, China! Beijing decided to devalue its currency on August 11th. The market felt that when the second largest economy is struggling it’s time to overreact. The Chinese economy was growing at a 7% clip and it appears to be slowing to a 3% or 4% rate. I like to point out it’s still growing and much faster than the U.S. So the question on everyone’s mind is how do we react? Should we sell or sit tight? If we do sell, where do we go? We are watching the numbers and events closely. Depending on whom you ask you will get different answers. Considering that the S & P has more than tripled since March of 2009. I am in the camp of “we have been in a multi-year bull market and valuations are getting high and the market needs to pull back and take a break”. As you know the market goes up and the market goes down, it is currently down. Our US economy is still growing lead by Housing and Auto although about 20% of it is flat lining (Oil and Commodities). We are watching the “numbers” to see if the world’s economy is going to stabilize or deteriorate. We will act accordingly. The other question is where can we go and get better returns? Sadly there are very few places. It is important to remember that market fluctuations like this are expected and your long-term goal is the thing to keep in mind. Your portfolios will never go up in a linear fashion but rise and fall with the
latest headline news. We are in the sit tight camp.

Willis Ashby, President and CFP®

Reference material from:

BMO Private Bank
Wall Street Journal
Morningstar
Integra Financial

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