Knowledge Center Archive
Q4 2015 Global Economic Market Review
Hello, Iím Kevin Barr, Head of SEIís Investment Management Unit. Over the next few minutes, Iíll provide an update on the global financial markets and their impact on our strategies. I will also provide our expectations for the year ahead.
Financial markets began 2015 on generally positive footing amid a global cycle of currency devaluations that further supported a strengthening U.S. dollar. Assets across the globe came under pressure in late spring as Chinaís mainland stock exchanges gave back a significant portion of their recent gains. Additional declines followed in late summer when China let its currency float more freely and devalue.
The MSCI All Country World Index, which serves as a proxy for global equities, was up more than 5% for the quarter in U.S. dollar terms. For the year it fell 2.36%.
In fixed-income, the Barclays Global Aggregate Index, which represents global bond markets, fell almost 1% for the quarter in U.S. dollar terms and a little over 3% for year.
Trouble in China and the related setbacks for emerging markets were the big story. Small fourth-quarter gains for these markets in both equity and fixed-income in the fourth quarter could not offset the serious declines for the year. Real estate and large-cap stocks set the pace for gains during the quarter and the year. Treasury bonds slid during the quarter as the Federal Reserve hiked interest rates by 0.25%, but posted modest gains for the year.
At the sector level, the decline in energy for the year eclipsed all other news even though healthcare, consumer staples, consumer discretionary and information technology and were all positive for the quarter and the year.
U.S. equity markets, represented by the S&P 500 Index, were up more than 7% for the quarter. For the year, the index lost 0.7% on a price return basis but gained 1.38% if dividends are included.
On the fixed-income side, the Barclays U.S. Aggregate Bond Index was down about half a percent for the quarter and up about the same amount for the year in U.S. dollar terms.
SEIís contribution to investment performance last year may be most evident when considered in terms of risk reduction, particularly among emerging-market equity and small-cap portfolios. Our managed volatility strategies fared well. U.S. equity portfolios were mixed with small-cap and value-oriented strategies helping despite notable negative returns in these areas. In short, managers generally succeeded in reducing benchmark-relative losses. Fixed-income portfolios were more evenly matched.
Among our model portfolios, conservative strategies tended to fare better relative to their benchmarks than our aggressive strategies, which struggled across the board. The poor result was largely due to the big decline in commodity prices.
The events of the first few weeks of 2016 have already pushed thoughts of 2015 aside. Concerns abound. How quickly will the Fed move? Will Chinaís troubles lead to contagion elsewhere? Will oil recover or move lower? The list goes on.
Despite these challenges, we think the expansion in the U.S. still has room to continue. U.S. equity market prices are now more attractive, as are prices in both equity and fixed-income investments in emerging markets. We see opportunities for active management amidst the volatility and do not expect the U.S. bull market to become a bear quite yet.
On behalf of everyone at SEI, thank you, as always, for your trust and confidence.
Source: FactSet, in USD, Small Cap = Russell 2000, Large Cap = Russell 1000, Global Equities = MSCI All Country World Index, Emerging Markets Equity = MSCI EM, Real Estate = DJ Wilshire RESI, High Yield = BofA Merrill Lynch U.S. HY Master II Constrained, Cash = BofA ML USD LIBOR 3M, Inflation Linked = Barclays 1-10Yr TIPS Index, U.S. Investment Grade Bonds = Barclays U.S. Aggregate, Global Bonds = Barclays Global Aggregate Bond Index, Emerging Markets Debt = 50% J.P. Morgan EMBI Global Diversified/ 50% JP Morgan GBI EM Global Diversified, U.S. Treasury = Barclays U.S. Treasury Bond.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts. There is no assurance as of the date of this material that the securities mentioned remain in or out of SEI Funds.
SEI Investments Management Corporation (SIMC) is the adviser to the SEI Funds, which are distributed by SEI Investments Distribution Co. (SIDCO) SIMC and SIDCO are wholly owned subsidiaries of SEI Investments Company.
There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments.
Diversification may not protect against market risk. There is no assurance the objectives discussed will be met. Past performance does not guarantee future results. Index returns are for illustrative purposes only and do not represent actual portfolio performance. Index returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index.
For those SEI Funds which employ the Ďmanager of managersí structure, SEI Investments Management Corporation (SIMC) has ultimate responsibility for the investment performance of the Funds due to its responsibility to oversee the sub-advisers and recommend their hiring, termination and replacement.
To determine if the Funds are an appropriate investment for you, carefully consider the investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Fundsí full or summary prospectuses, which can be obtained by calling 1-800-DIAL-SEI. Read them carefully before investing.
- Not FDIC Insured
- No Bank Guarantee
- May Lose Value