Market Overview | First Quarter 2016

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The first week of 2016 marked the worst start to U.S. stock market trading in history. Heightened volatility — spurred by a myriad of global concerns, including a slowdown in the Chinese economy, a crash in oil prices and uncertainty surrounding central bank policies — unsettled equity markets well into February. With such a shaky start, few would have anticipated the strong rally that took place in the latter half of the quarter, bringing the first quarter results for global equities and fixed income into positive territory.

The S&P 500 Index, which is composed of U.S. large-company stocks, rose 1.4% in the first quarter. Value stocks (Russell 1000 Value TR: +1.6%) outperformed growth stocks (Russell 1000 Growth TR: +0.7%) and previously beaten-up sectors, such as materials and energy, participated in the recovery. The outperformance of value stocks was particularly strong among smaller capitalization stocks.


The dollar depreciated this quarter relative to both developed- and emerging-market currencies, which had a positive impact on returns for U.S. investors overseas. Emerging-markets stocks (MSCI EM GR) led the global stock recovery, logging in returns of +5.8% (in US$ terms). International-developed markets stocks began to recover in the last month of the quarter, but the rally wasn’t sufficient to erase the declines experienced earlier in the year. The MSCI EAFE Index declined by 3.0% in US$ terms.


On the fixed-income side, the Federal Reserve held off raising rates in the first quarter, citing global growth concerns. The U.S. yield curve flattened, with rates at the shorter end declining by less than rates at the longer end of the curve. The Barclays Aggregate Index of domestic investment-grade bonds (the U.S. bond market) was up by 3.0% for the quarter.

High-yield bonds (BofAML US HY C Pay BB-B Constd Index) gained 3.2% for the quarter.
As oil prices began to recover, investor fears regarding high-yield defaults in the energy sector were somewhat allayed, and the fear of default in other sectors of the high-yield market appeared to be overblown.

International fixed-income also performed well this quarter, buoyed by the weakness of the U.S. dollar. Unhedged developed-country bonds (Barclays Global Aggregate ex-U.S. Index – Unhedged) rose 8.3%, as the European and Japanese Central Banks continued with their expansionary monetary policies. Emerging-markets bonds (JPM GBI-EM Gl Div UH) gained the most (+11.0%) following a rough 2015.

The results of this quarter underscore the importance of a disciplined approach to investing. As we see time and again, markets tend to recover well before the news becomes upbeat. An undisciplined investor distraught by the market sell-off in January could have easily been spooked out of the market before the recovery began to take place and would have missed out on the positive returns the market served up at the end of this tumultuous quarter.


Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional. Hewins does not provide tax, accounting or legal services.
Rafia Hasan
Rafia Hasan

CFA®, CFP® | co-Chief Investment Officer

Rafia Hasan, CFA®, CFP®, is the co-Chief Investment Officer for Hewins Financial Advisors, based in Chicago, IL. Rafia is a member of Hewins' Investment Committee and has a deep knowledge of the financial markets, specifically in the areas of alternative investments and private equity. She also specializes in personal financial planning and estate planning for women investors.

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Market Overview | First Quarter 2016

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