Broker Check

March 2016 Month In Review

With tax season coming to a close (at least for those who don’t file extensions) it is a great reminder to reconsider and freshen up on financial plans and objectives to see how much progress is being made year over year. From an investment standpoint the answer may be, “not so much.” However, March finally has given us a month to provide the first round of hope that this year we will not go into a recession-based or non-recession-based U.S. bear market. The S&P 500 ended the month +6.78% while the U.S. Aggregate Bond Index ended nearly flat at +0.16%1. From a sector position, the top three performing sectors were, Real Estate, Energy and Technology, in that order with respective returns of +10.26%, +9.80%, and +9.19%2. Our personal growth models have the most above benchmark exposure (based on % over benchmark) to Energy, Healthcare, and Financials3. Healthcare currently (as of 4/10/2016) is leading the charge this month, while Financials continues to create a short-term drag, which we feel will turn over the course of the next 18 months.

From an economic standpoint, here in the U.S. we have reversed our month-to-month contraction in the manufacturing sector, and now show expansion in both manufacturing and non-manufacturing indexes4. Wages have continued to go up5, the jobs market continues to show signs of improvements6, consumer household net worth is the highest it’s ever been7, and possibly most importantly…oil prices have finally stabilized.

Oil production in the U.S. is on the decline and expected to continue that behavior for the rest of this year and 20178. Global production however will continue to slowly move higher as the daily supply overage is expected to be 1.6 million barrels/day (b/d) in 2016 and 0.6 million b/d in 2017; most of this growth is expected to come from OPEC countries9. When the statement is heard that “we make 1.8 million more barrels per day than we produce,” it can seem quite daunting; however a little context could help put it into perspective. The average world production of crude oil is 96.44 million b/d; meaning there is less than a 2% overhanging surplus experienced in the global markets. Let’s compare that to the 1980s (which seems to be the trend these days). While the price changes looked similar, nothing was similar about the daily surplus. In 1986, the world production of crude oil was around 55.7 million barrels per day. It was estimated that the daily supply glut reached 14 million b/d before reform happened that began decreasing supply and increasing demand. That’s an overhang of supply of over 25%! Less than 2% pales in comparison10.

Another newsworthy event in March was the Fed meeting. The Fed came out and solidified in their statement that they would make 2 more rate hikes this year. Oddly enough, the markets continue to price in less than 1 (measured by the futures market).The only thing that will fix this is time…so we all will just have to wait and see. If the Fed goes through with their statement however we would see some major moves in the markets, both positive and negative. Our interest rate hedge right now is our overexposure to financials, which we believe would benefit greatly from more Fed rate hikes.

This biggest news in the market is the 1st Quarter earnings season which kicks off the week of the 11th. This will be news to talk about next month, however we are looking for a “trough-ing” in the earnings drag from oil markets and the strong dollar…leaving the rest of the year open for the potential for earnings growth and an advancement in the markets.

As always, if you have any questions please feel free to contact us.


Best Regards,





1Morningstar Office software

2Sector return based on the iShares respective super sector ETFs

3Based on our Aggressive Growth and Growth models as shown in the Morningstar Office software.

4Based on the ISM Purchasing Managers Index:

5JPMorgan Guide to the Markets 2nd Quarter 2016, pg. 25

6­­Jobs creation report:

7JPMorgan Guide to the Markets 2nd Quarter 2016, pg. 19

8EIA March U.S. Short-Term outlook:

9EIA March Global Short-Term outlook:



Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

The economic forecasts set forth in the article may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Investing involves risk, including the loss of principal.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  All indices are unmanaged and cannot be invested into directly.  Unmanaged index returns do not reflect fees, expenses, or sales charges.  Index performance is not indicative of the performance of any investment.  Past performance is no guarantee of future results.