Endowment Management Report
The market value as of 12/31/15 was $14,741,774. This represents an increase of approximately $348,000 (or 2.4%) in the 4th quarter of 2015. For the Calendar Year 2015, the portfolio is down approximately 2%.
2015 was a difficult year for diversified portfolios, where most major equity markets were negative, long bonds were negative, cash at 0%, and commodities down 23%. According to Morningstar the average return of most Moderate Allocation mutual funds was -2%. The China slowdown, a strong dollar and the dramatic decrease in oil prices were the main drivers of down markets.
The big news in the quarter occurred when the Fed finally raised fed funds off zero-bound, by 25 basis points. This represents the first hike in almost 10 years. The Federal Reserve statement used the word “gradual” twice when referencing pace of future rate hikes; appear to want more tangible evidence of progress toward inflation goal before raising again. The Federal Reserve will continue to reinvest maturing QE (Quantitative Easing) proceeds “until normalization of fed funds rate is well under way”.
Geopolitical tensions are on the rise in Europe and the Middle East following terrorist attacks in Paris and the shooting down of a Russian warplane by Turkish fighter jets over Syria. However, global markets appeared to be unfazed by the impassioned headlines that followed, as stocks kept losses to a minimum and the price of West Texas Intermediate (WTI) crude continued to fall into the low $40s.
Data showed that the U.S. economy grew at a faster pace in the third quarter than previously reported. Gross domestic product (GDP), the value of all goods and services produced in the U.S., rose at a 2.1 percent annualized rate, up from an initial estimate of 1.5 percent.
Economic theory would suggest that tighter monetary policy in the U.S., coupled with an easing ECB, would result in a stronger dollar. However, historically this has not been the case. Since 1971, during periods when the Fed tightened and the ECB eased simultaneously, the U.S. dollar weakened 60 percent of the time, usually falling approximately 6 percent over a six-month period.
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