Market Overview: First Quarter 2015
The Dow Jones Industrial Average and S&P 500 hit new records during the first quarter, but the rally stalled in late March over concerns about the impact of a stronger dollar on profits of big, U.S.-based multinational firms. Approximately half of the sales of S&P 500 companies come from overseas, and there is a negative impact when translated back into the stronger U.S. dollar. The S&P 500 rose 0.95%, its ninth quarter in a row of gains, but finished the quarter 2.3% below its record, set in March.
On the flipside, a weaker Euro helps European based exporters, as their goods are now considerably cheaper to foreigners. The weaker Euro has also made for some more attractive acquisition prices for U.S. companies looking to expand business there. Increased merger and acquisition (M&A) activity helped propel international stocks in the first quarter.
In a reversal from 2014, when international stocks generally hurt returns of global portfolios, developed market stocks rose over 6% (MSCI EAFE Index), and emerging stocks returned 4.1% (MSCI Emerging Markets Index).
Bonds outperformed U.S. stocks for the quarter, returning 1.66%, as measured by the Barclays U.S. Aggregate Bond Index. While U.S. interest rates remain uninspiring, rates in most foreign markets are even lower, causing foreign capital to flow to the U.S., supporting bond prices here, and thus keeping a lid on rates.
Please contact Tim Agnew at 404-874-6244 with any questions or for additional information.
All references in this publication referring to our average allocation or “typical portfolios” reflect those of the fully discretionary accounts of clients with moderate risk profiles. Actual client portfolios are tailored to individual client circumstances and asset allocations may vary. Any reference to returns reflect the performance of asset classes, are for illustration purposes only, and do not reflect the returns of any specific investment of Smith & Howard Wealth Management. No representation is made that any investment decisions discussed herein have been profitable in the past or will be in the future. Past performance is no guarantee of future results. A list of all recommended investments is available upon request.