Eclectic Associates 2015 Year-In-Review And 2016 Outlook

Eclectic Associates 2015 Year-in-Review and 2016 Outlook
Every January, our advisors meet as an investment committee and review the previous year’s economic trends and investment returns. We also develop an outlook for the upcoming year and beyond, and review our investment process. Here is a summary of the key points we covered in our 2016 Economic Review and Outlook meeting.

2015 In Review
The past year proved to be a challenging one for financial assets worldwide. Stocks battled headwinds of low economic growth, and US investors faced lower returns than expected due to the strengthening dollar. Below is an outline for some of the key numbers for the year:

  • S&P 500 = up 1.4%
  • Bonds = up 0.5%
  • International Stocks = down -0.4%
  • Inflation = up 0.7%
  • Oil = dropped 30% to $37.28 a barrel
  • Gold = down 12.1% to $1,060 per ounce
  • US GDP = up 2.4%

The Federal Reserve finally ended its zero-bound interest rate policy that had been in place since late 2008. They had been telegraphing a rate hike for the past year, and the markets had a subdued reaction when the hike finally occurred.

Few economists were predicting oil prices near $30 per barrel, and even fewer thought that these levels would coincide with a slowdown in consumer spending. In general, savings from lower energy expenses flowed elsewhere into the economy.

A few areas that surprised us the most in 2015 were:

  • Continued strong US Dollar
  • Greece survived and stayed in the EU
  • The fall in oil prices did NOT result in a bump in consumer spending & better US GDP

Below is a chart from JP Morgan which shows S&P 500 Index annual percentage returns (the solid bars) from 1980 to 2015. Below each annual return bar is a pink dot which indicates the largest percentage drop that occurred sometime during the year. We’re showing this chart again because it is a good reminder that the stock market often recovers from intra-year declines.

Feb2016.jpg

Looking Ahead to 2016:

Here are some of the key issues that we expect to play out over 2016:

  • Federal Reserve raise interest rates 1-2 times this year, not 3-4 times as expected a few weeks ago
  • European Central Bank continuing to ease monetary policy to jump-start the European economy
  • US Dollar to stabilize versus world currencies
  • Inflation to remain low
  • Continued slow US GDP growth
  • Emerging Markets rebounding from currently depressed valuations
  • How fast is China’s economy actually growing?

Our investment strategy is to:

  • Own quality investments
    • Use fund managers with proven long-term track records
    • Own investments that complement each other
       
  • Invest across a mix of cash, bonds, stocks & other investments (diversification)
    • Reduce exposure to any one particular asset class

Our goal is to provide you with peace of mind about your money and your future. Our strategy is to focus on building investment portfolios that match your goals and combine this with sound financial planning.

Please contact us if you have any questions or would like to review your financial plan.

About Our Name…
We are often asked about how we came up with the name “Eclectic Associates”. As Bill and Anita Camp were trying to decide on a name for their new company, Anita came across the word “Eclectic” in the dictionary. She felt this word fit because:

  • Select what appears to be best in various doctrines, methods, or styles
  • Composed of elements drawn from various sources
  • Chosen from among the best

This word truly got to the heart of the Camps’ desire to help people with their business. Thus, the name, “Eclectic Associates” was chosen.

Kristen Luke