Q1 2016 - Top Guns US Equity Markets make a U-Turn

During the first six weeks of Q1 2016, the U.S. stock market was in a full-on nose dive, with the S&P 500 index dropping roughly 11% during this short period.  A crash in oil prices, a global slowdown (including talk of a U.S. recession), currency devaluations, global banking concerns and global central bank policies all captured the attention of investors.  Then came the inflection point on February 11th, which marked the bottom for U.S. markets and oil prices.  Since February 11th, the S&P 500 index rebounded approximately 13% to end the quarter in the black at 1.35%.  Yes, it was quite the ride.

Global central banks wrestled with the idea of keeping interest rates at all-time lows or even lowering rates into negative territory.  These actions provided support to bond prices, while yields continued to fall.  U.S. Corporate bonds, measured by the Barclays U.S. Aggregate index, rallied during the quarter with a total return of 3.03%.

Despite the struggles of the financial sector, which typically falls on the value side of the growth–value spectrum, generally speaking, value funds out performed growth funds during the quarter. In particular, small cap value funds, measured by the Russell 2000 Value index (+1.70%), outperformed small-cap growth funds, measured by the Russell 2000 Growth index (-4.68%) by a wide margin.  Below are some of the funds that make up the Small Cap Value PSN Top Guns.

• Aegis Financial: Small Cap Value (+24.2% for the quarter)
•  Century Mgmt.: Small Cap Value (+9.8% for the quarter)
• Towle & Co.: Deep Value (+8.8% for the quarter)

The rebound in commodity prices from a volatile start to the year, stimulus packages from global central banks, and dovish remarks from the Federal Reserve regarding rate hikes all contributed to a healthy 5.75% return for the MSCI Emerging Markets index during the quarter.  The following strategies made the PSN Top Guns list for the Emerging Markets Universe.

• T.Rowe Price: Latin America Equity Strategy (+20.7% for the quarter)
• ClariVest Asset: Emerging Markets (+18.3% for the quarter)
• Brandes Partners: Emerging Markets Equity (+13.0% for the quarter)

The international fixed income space was driven by record low interest rates, and in some instances, negative interest rates, as well as safe-haven buying as investors fled to safety.  The foreign bond market (Citigroup Non-USD WorldBIG Index, +8.48%) also received a big boost when European Central Bank (ECB) President, Mario Draghi, announced the ECB would begin including corporate bonds as part of its bond buying program.  The following strategies made the PSN Top Guns list for the International Fixed Income Universe.

• Colchester Glob: Local Market Debt Composite (+13.6% for the quarter)
• Mondrian Invst: Emerging Markets Debt (+12.9% for the quarter)
• Neuberger Berman: Emerging Markets Debt - Local Currency (+11.8% for the quarter)

The complete list of PSN Top Guns and an overview of the methodology can be located on www.informais.com under the “Resources” tab.  If you do not have a login, you can complete the registration process for complimentary access.  For more details on the methodology behind the PSN Top Guns Rankings, or to purchase PSN Top Guns Reports, contact Ruth Calderon at ruth.calderon@informais.com.