March demonstrated once again that the stock market is unpredictable and volatile in the near term. For the month, the MSCI ACWI IMI world stock market index was up 7.56%, thereby recouping all of the losses from January and February and putting the year-to-date return at a positive 0.30%. So if only you had been on a desert island since January 1 and not checked the news or any websites, you would return to the real world to learn that the stock market was basically flat for the first quarter of 2016 and you missed the roller-coaster ride in between.
March was a good month for our strategy, with almost all asset classes outperforming U.S. large company stocks. On a year-to-date basis, international emerging markets, real estate securities, U.S. small cap value and small cap and commodities are leading the way with positive returns.
Warren Buffett, Chairman of Berkshire Hathaway Inc. and credited as one of the greatest investors of all times, writes an annual Chairman’s Letter in the shareholders’ annual report that is worth a Google search and complete read of all 30 pages or so (OK, you can skim some of it). He offers an encouraging outlook in his 2015 Annual Report letter:
“It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history. American GDP per capita is now … a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents. … U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more. This all-powerful trend is certain to continue: America’s economic magic remains alive and well. … All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. … Though the pie to be shared by the next generation will be far larger than today’s, how it will be divided will remain fiercely contentious. … The good news, however, is that even members of the ‘losing’ sides will almost certainly enjoy—as they should—far more goods and services than they have in the past. The quality of their increased bounty will also dramatically improve. … For 240 years it’s been a terrible mistake to bet against America, and now is no time to start.”
I like to be positive and optimistic, so let’s take his perspective to heart!
As always, please contact us with any questions, news or comments.