Market Overview
Negative sentiment surrounding global equity markets continued into the New Year. Concerns about China evolved from being mostly economic in nature to concerns about the stability of the Chinese stock market and currency (yuan). United States stocks were not immune to the global market sell-off as oil prices tested new lows and companies domiciled in the U.S. reported weaker sales and earnings growth. Nearly half of the companies in the S&P 500 Index have reported fourth quarter results pointing to negative growth for 2015. Companies in the energy, materials, and industrials sectors continue to struggle against the drag of lower commodity prices, a stronger U.S. dollar and weaker global demand in their end markets.
While U.S. large capitalization companies fared best, investors found little comfort in the equity markets at the start of 2016. Major U.S. indices were down approximately 5% in January. The Russell 2000 Index declined 8.79% as U.S. small companies continued to underperform. Outside the U.S. it was even worse. The MSCI All Country World Index ex U.S., which tracks the world’s equity markets excluding the U.S., was down 6.79% and the MSCI EAFE Index, which tracks foreign stocks from developed markets, also declined for the month ending the period down 7.23%.
Demand for the safety of U.S. Treasury securities continued in January as the yield for the 10-year note fell by 0.34% which led to a strong gain for bonds relative to stocks. Falling yields led to a 1.38% gain for the Barclays U.S. Aggregate Bond Index for the month. Lower quality corporate bonds continued to struggle with the Bank of America Merrill Lynch US High Yield Index down 1.58% for the month. Global interest rates continued to fall leading to a 0.87% gain in the Barclays Global Aggregate Index. In commodities, West Texas Intermediate (WTI) crude oil ended the month at $33.63 per barrel, down 10%. Slowing global growth along with persistently high U.S. supply and anticipation of fresh supply hitting the markets add to the challenging market for oil and other commodities. During January, oil dropped below $30 per barrel and breached levels not seen in more than twelve years.
Major Index Returns
| TYPE | JANUARY | YTD | |
|---|---|---|---|
| DOW JONES INDUSTRIAL AVERAGE | Stock | -5.39% | -5.39% |
| S&P500 | Stock | -4.96% | -4.96% |
| RUSSELL 2000 | Stock | -8.79% | -8.79% |
| MSCI ALL WORLD EX-U.S. | Stock | -6.79% | -6.79% |
| MSCI EAFE | Stock | -7.23% | -7.23% |
| S&P GSCI | Commodities | -5.17% | -5.17% |
| ALERIAN MLP | MLPs | -11.10% | -11.10% |
| BARCLAYS U.S. AGGREGATE | Bond | 1.38% | 1.38% |
| BARCLAYS GLOBAL AGGREGATE | Bond | 0.87% | 0.87% |
| B OF A MERRILL LYNCH US HIGH YIELD | Bond | -1.58% | -1.58% |
| BARCLAYS 1 – 10 YEAR MUNI | Bond | 0.99% | 0.99% |