During the fourth quarter, global equity markets recovered from a sell-off in Q3, though the impact was modest (and from today’s vantage point, short-lived). The S&P 500 index rebounded 7% during Q4, yet barely eked out a positive return for the full year (+1.4% including dividends, the index’s worst performance since 2008).
As the year comes to an end, we wanted to thank you for your trust in our services. We’ve worked with some of you and your families for more than 20 years now, and it is much appreciated.
In our Q2 review, we pointed out the exceptional long term performance of health care stocks, and in particular, the improbably strong performance of pharmaceutical and biotech shares (noting that about 70% of the companies in the Nasdaq Biotechnology Index had not even reported a profit over the prior twelve months).
As we discussed last month, China’s economic slowdown, dithering on interest rates from the US Federal Reserve, and declining commodity prices weighed heavily on financial markets in the third quarter.
Stock market volatility returned in August, as a slowdown in the Chinese economy (and a steep selloff in Chinese stocks) reverberated around the globe.
A few of our clients have requested that we expand on our June post about rising rates. In particular, they’ve asked: “why not switch entirely to bonds with shorter maturity, in order to better protect against rising rates?” We see multiple reasons for not doing so: