2016!Market!Review!
In!2016 ,!th e !U S !market!rea ch e d !n e w!highs!an d!stocks!in !a !m a jo rit y!o f !d ev e lo p ed!and!emerging!market!countries!
delivered!positive!returns.!The!year!began!with!anxiety!over!China’s!stock!market!and!economy,!falling!oil!
prices,!a!potential!US!recession,!and!negative!interest!rates!in!Japan.!US!equity!markets!were!in!steep!d e clin e !
and!had!the!worst!start!of!any!year!on!record.!The!markets!began!improving!in!mid-February!through!midyear.!
Investo rs !als o !fa ce d !u n c er ta in ty !fro m!the!Bre x it!v o te !in !June!an d !the!U S!ele ction !in!N ov em b er. !!
Many!investors!may!not!have!expected!global!stocks!and!bonds!to!deliver!positive!returns!in!such!a!tumultuous!
year.!This!turnaround !story!highlights!the!importance!of!diversifying!across!asset!groups!and!regional!markets,!
as!well!as!staying!disciplined!despite!uncertainty.!Although!not!all!asset!classes!had!positive!returns,!a!globally!
diversified,!cap-weighted!portfolio!logged!attractive!returns!in!2 0 16 .!!
Consider!that!global!markets!are!incredible!information-processing!mach in e s!that!incorpo ra te!news!and!
expectations!into!prices.!Investors!are!well!served!by!staying!the!course!with!a n!ass et!alloca tion !that!refle cts!
their!needs,!risk!preferences,!and!objectives.!This!can!help!investors!weather!uncertainty!in!all!of!its!forms.!The!
following!qu ote !by!E ug en e!Fa m a !des cribe s!this!vie w.!
“If$three$or$five$years$of$returns$are$going$to$change$your$mind$[on$an$investment],$you$shouldnt$have$been$
there$to$begin$with.” ! ―Eugene!Fama!
The!chart!above!highlights!some!of!the!year’s!prominent!headlines!in!context!of!broad!US!market!performance,!
measured!by!the!Russell!3000!Index.!Th e se !h e a d lin e s!a re !n o t!o f fe re d !to !e x p lain !market!re tu rn s.!In s te a d ,!th e y!
serve!as!a!reminder!that!investors!should!view!daily!events!from!a!long-term!pe rspe ctive!and!avoid!making!
investm e n t!d e cis io ns !b a se d !so le ly!o n !th e !n e w s .!
The!chart!below!offers!a!snapshot!of!non-US!stock!market!performance!(developed!and!emerging!markets),!
measured!by!the!MSCI!All!Country!World!ex!USA!Index!(in!USD,!net!divid en ds ).!The!headlines!should!not!be!
viewed!as!determinants!of!the!market’s!direction!but!as!examples!of!events!that!may!have!tested!investor!
discipline!during!the!year.!