- We are optimistic about wider valuation spreads, which expand opportunities across many sectors of the U.S. equity universe.
- While non-U.S. central banks remain accommodative, markets are concerned about the limits of monetary policy.
- We remain cautious with respect to emerging markets, although they may benefit if the U.S. dollar’s recent weakness persists.
The first quarter of 2016 is likely to rank among the more memorable periods, in terms of both highs and lows, for equity investors. After finishing 2015 with their weakest annual returns in years, stocks began 2016 with a bout of severe volatility. Investor worries expanded to include a new concern — the potential for a U.S. recession. Combined with continuing angst over oil price volatility and slowing growth in China, recession fears hit stocks hard, with most markets plunging more than 10% by February 11. Equities then staged a rebound almost as dramatic as their new-year plunge. As recession fears subsided, markets rallied through the end of the quarter, breathing a collective sigh of relief after a historically turbulent start.