Quarter 4 2015 Report

7/25/2019 Quarter 4 2015 Report

1/15

Q4Quarterly Market ReviewFourth Quarter 2015


2/15

Quarterly Market Review!"#$%& (#)$%*$ +,-.

Overview:

Market Summary

World Stock Market Performance

World Asset Classes

US Stocks

International Developed Stocks

Emerging Markets Stocks

Select Country Performance

Real Estate Investment Trusts (REITs)

Commodities

Fixed Income

Global Diversification

Quarterly Topic: The Rise of Short-Term Rates

This report features world capital market performance

and a timeline of events for the past quarter. It begins

with a global overview, then features the returns of

stock and bond asset classes in the US and

international markets.

The report also illustrates the performance of globally

diversified portfolios and features a quarterly topic.


3/15

Market Summary

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Past per formance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]),

Global Real Estate (S&P Global REIT Index), US Bond Market (Barclays US Aggregate Bond Index), and Global Bond ex US Market (Citigroup WGBI ex USA 1!

30 Years [Hedged to USD]). The S&P data are provided byStan da rd & Poor's Index Services Group. Russell data Russell Investmen t Group 19952016, all rights reserved. MSCI data MSCI 2016, all rights reserved. Barclays data provided by Barclays Bank PLC. Citigroup bondindices 2 016 by Citigroup.

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4/15


6Graph Source: MSCI ACWI Index. MSCI data MSCI 2016, all rights reserved.It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.

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These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily

events from a long-term perspective and avoid making investment decisions based solely on the news.

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IMF Downgrades

Global Economic

Outlook Again

US Growth Cools

in Third Quarter

US Trade Gap Widens

Sharply on Strong Dollar

Iran Nuclear Deal

Formally Adopted

Number of First-Time Home

Buyers Falls to Lowest Levels

in Three Decades

Eurozone Economy

Slows as Exports

Weaken

US Inflation Undershoots

Feds 2% Target for

42nd Month

Spot Gold Hits

Six-Year Low

Fed Raises Interest

Rates, Citing

Ongoing US

Recovery

Oil Prices Skid to

Seven-Year Lows

Junk Bond

Selloff Intensifies

US Factory

Activ ity Hits

Six-Year Low

Worst Year

for S&P, Dow

since 2008


5/15


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The se headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news.

Graph Source: MSCI ACWI Index. MSCI data MSCI 2016, all rights reserved.It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.

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Short Term(Q1 2015Q4 2015)

US Job Growth

Strongest Since 1999

Japan Shares Hit

Fresh 15-Year High

Strong Dollar

Hammers Profits

at US Multinationals

Nasdaq Composite,

S&P 500 Close

at New Highs

Home Building

Surges to Best

Pace since 2007

Fed Flags Slow Pace

for Rate Hikes

Iran, World Powers

Reach Nuclear Deal

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Russia Begins

Air Strikes in Syria

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IMF Downgrades

Global Economic

Outlook Again

US Inflation

Undershoots Feds 2%

Target for 42nd Month

Fed Raises Interest

Rates, Citing Ongoing

US Recovery


6/15

World Asset Classes

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Past per formance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.The S&P data is provided by Standard & Poor's Index Services Group. Russell data Russell Investment Group 19952016, all rights reserved. MSCI data MSCI 2016, all rights reserved. Dow Jones data (formerly Dow

Jones Wilshire) provided by Dow Jones Indexes. Barclays data provided by Barclays Bank PLC.

Looking at broad market indices, the US equity market again outperformed both developed ex US and emerging markets during the

quarter. In a repeat from the third quarter, US REITs recorded the highest returns, outperforming equity markets.

The value effect was negative in the US, developed ex US, and emerging markets. Small caps outperformed large caps in both developed

ex US and emerging markets but underperformed in the US.

Fourth Quarter 2015 Index Returns (%)

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Dow Jones US Select REIT Index

S&P 500 Index

MSCI World ex USA Small Cap Index (net div.)

Russell 1000 Value Index

MSCI Wor ld ex USA Index (net div.)

Russell 2000 Index

MSCI Emerging Markets Small Cap Index (net div.)

Russell 2000 Value Index

MSCI Wor ld ex USA Value Index (net di v.)

S&P Global ex US REIT Index (net div.)

MSCI Emerging Markets Index (net div.)

One-Month US Treasury Bills

Barclays US Aggr egate Bond Index

MSCI Emerg ing Markets Value Index (net div.)


7/15


8/15

International Developed Stocks

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Fourth Quarter 2015 Index Returns

Past per formance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.Market segmen t (index representation) as follows: Large Cap (MSCI World ex USA Index), Small Cap (MSCI World ex USA Small Cap Index), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USA

Growth). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI World ex USA IMI Indexused as the proxy for the International Developed market. MSCI data MSCI 2016, all rights reserved.

In US dollar terms, developed markets outside the US

underperformed the US equity market but outperformed

emerging markets indices.

Small caps outperformed large caps in non-US

developed markets.

Value indices underperformed growth indices across all

size ranges in non-US developed markets.

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Growth of Wealth: The Relationship between Risk and Return

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Global Diversification

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Fourth Quarter 2015 Index Returns

Diversification does not eliminate the risk of market loss. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect expenses associatedwith the management of an actual portfolio . Asset allocations and the hypothetical index portfolio returns are for illustrative purposes only and do not represent actual performance. Global Stocks represented by MSCI All

Country World Index (gross div.) and Treasury Bills represented by US One-Month Treasury Bills. Globally diversified allocationsrebalanced monthly, no withdrawals. Data MSCI 2016, all rights reserved. Treasury bills Stocks, Bonds, Bills, and Inflation Yearbook, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield).

These portfolios illustrate the performance of different

global stock/bond mixes and highlight the benefits of

diversification. Mixes with larger allocations to stocks

are considered riskier but have higher expected

returns over time.

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15/15

While many market participants were waiting for

the inevitable rise in short-term interest rates

expected when the Federal Reserve tightened

its monetary policy, s ome investors may have

missed the increase in short-term rates already

underway as a result of market forces.

Looking at the zero- to two-year segment of the

yield curvethe segment that many believe will

be most affected whenever the Fed normalizes

interest ratesit may be surprising to see how

much rates have increased since 2013.

In fact, the yield on the 2-Year US Treasury note

has nearly doubled since the beginning of 2015,

rising from 0.45% in January to almost 0.90% in

late November.1 The yield on the 1-Year US

Treasury note more than tripled, from 0.15% to

more than 0.50% over the same period. The 6-

Month US Treasury bills yield rose from a low of

0.03% in May to over 0.30% in late November.

Yet, despite the higher rates, we have not

experienced the conjectured f inancial storm in

the fixed income market.

The question of how far the Fed will go in raising

its overnight target rate is still open. Similarly,

we can ask ourselves a more complex question:

Will the market lead the Fed or is the Fed

leading the market through setting

expectations?

The Rise of Short-Term Rates

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Past performance is no guarantee of future results. Source: Barclays Bank PLC.

1. As of November 18, 2015. Source: Barclays Bank PLC.Adapte d from The Rise of Short-Term Rates, Issue Brief, November 2015. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates and may be subject to various other risks, including changes in credit quality, liquidit y, prepayments, and other factors. Sector-specificinvestments can increase these risks.All expressions of opinion are subject to change. This information is intended for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.

Fourth Quarter 2015

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Documents

Quarter 4 2015 Report