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Highlights:

  • NOTE: the following provides 3D’s commentary on the events that shaped 1Q2016 performance.  Here is a link to supplemental charts summarizing key market performance
  • The markets ended the quarter in the same uncertain state that they began the quarter with many of the outstanding issues (China uncertainty, global central bank directions, political instability, commodity price volatility) that have yet to be resolved.
  • Markets sold off in January and early February following another ‘unexpected’ devaluation of China’s currency, oil prices collapsing to mid-$20/barrel, and concerns about the near-term solvency of European banks.
  • Markets sharply recovered these early quarter losses, but this recovery had been generally characterized as a ‘short squeeze’ by overextended momentum traders betting on an outright market collapse.
  • It is unclear whether the market recovery can sustain itself over the rest of the year.  Bullish investors point to some increasing breadth such as the outperformance of U.S. industrials and emerging markets.  Sell-side analysts expect S&P earnings to continue to drop in the 2nd quarter but then recover later in the year. 
  • The unexpected ouperformance of beaten-down sectors and regions highlights the need for global diversification across major market segments, whether regions, sectors, or factors. 

To read more, download the full Market Commentary.

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