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2016 Market Summary



What a year 2016 turned out to be! From hitting 3 year market lows in February to a powerful rebound and rally to new highs by year-end. The market reminded us again, the value of patience.

Our patience and positioning through the turbulence paid off with solid results for 2016. Specific results for client accounts are reviewed during the year, but we will take a look at general markets for 2016 discussion.

  • New York Stock Exchange: +8.13


*NYSE represents the largest stock exchange in world and many consider reflective of total markets

  • Core Aggregate Bond Index: +0.32%


**I shares core bond index, ticker AGG, represents Barclays US Aggregate Bond index and is widely used to show the total bond market performance

2016 Market Summary

Stock Market Summary

The general stock markets broke through the 2015 lows in February 2016, making a total peak to trough decline over -15% as represented by multiple indexes such as the New York Stock Exchange, Wilshire 5000, S&P 500 among others. The decline created high emotion among investors, causing some to abandon ship for the perceived safety of bonds, and/or cash. We felt the declines had little long-term merit and used them to rotate into better value and stay the course. We knew it was simply a matter of time before investors would realize the fundamental value of company cash flows, earnings and assets afforded by owning stocks.

Our patience was rewarded with a rebound taking markets near time highs. As the great investor Warren Buffet states, "The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd."

Bond Market Summary

Bond markets rallied very strong from January to August. They served our moderate and conservative clients well by dampening some of the downside in January/February while also providing a stable income source. As the year progressed it became clear the economy was solid enough for the Federal Reserve to start increasing rates. This reality caused a quick decline in bonds during the 4th quarter, bringing the aggregate bond market to a 0.32% year-end performance.

We continue to view bonds as uninspiring, but necessary. It is the one asset class with reduced risk properties around income and price maturity. As such we continue to use for controlling risk within moderate and conservative accounts but are research intensive on owning bonds with adequate risk/return tradeoffs to meet objectives. Our allocation will remain lighter than desired due to interest rate pressures, but will serve the key objective of risk reduction and added income generation.

So what will happen in 2017?

Just like 2016, we find it key to focus on truth and not predictions. Predictions are based on assumption where truth is based on fact. Focusing on truth provides wisdom and wisdom provides better action. Below are key truths for both the market and life in general for 2017.

  • Something bad will happen

  • Something good will happen

  • Reaction will determine outcome

We know some bad and good will happen in 2017. Our reaction will dictate long-term results. The markets, as in life, are not immune from this universal and Biblical truth. Investments, relationships, health, spirituality will all throw at us some bad and some good things for 2017. Our ability to apply wisdom will ultimately pave our long-term success, our joy and our inner peace. 


We started 2016 with warning markets would likely test and breakthrough the prior year lows, and they certainly did! We also preached optimism for the long term, which played out by year-end with great rewards for patience.

Will we have more upside or downside in 2017? We have little accuracy in short term predictions. Events well out of our control can dictate drops or a continued rally. We simply need to ignore these aspects and concentrate on what is within our control – our reaction. Seeking opportunity, staying long term focused, capturing income to meet needs are all within our control.

Conclusion

2016 was my first full calendar year at the helm with Evergreen Wealth. The hard work that happened behind the scenes in 2015 to create new research, accountability, communications, transparency, service and customization has started to shine through. We aim to continue this work with an appetite for excellence in all we do.

Thank you for being part of our journey in 2016!

(1) Client returns and risk may experience deviation from model performance based on timing of deposits & withdrawals, among other factors. Overall, clients subscribed to Evergreen's model portfolios experience similar results mentioned in the article.

Evergreen Wealth Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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"The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd." - Warren Buffet

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