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February 2016 archive

February 2016

2015 was a roller coaster year for investors, with most markets and asset classes around the world ending the year in negative territory. The primary exception was U.S. growth stocks, where a handful of businesses, the so-called FANG companies (Facebook, Amazon, Netflix, and Google) accounted for 55% of the stock market's meager return (the S&P 500 increased 1.2%, the Dow lost 2.2%). Partly because of this phenomenon, in the U.S. value stocks were down over 9% during the course of the year against their growth oriented brethren, while in Europe the gap was an unprecedented 13%.

For dollar-based investors, international equity returns were also uninspired, as the Morgan Stanley all country Index (MSCI ACWI) was down 4.3%, European stocks fell by 6%, and emerging markets declined by a whopping 17%. Japan was the one bright spot among major stock markets, increasing 7.8% in dollar terms. The strength of the dollar contributed substantially to some of these falls, as it gained an average of 12% against its main trading partners. As a result, dollar based investors lost money even while some non-U.S. markets were rising. Diversification across asset classes was also of limited usefulness, as commodities (down 25%, led by oil), MLPs (down 16%), and global bonds (down 3.2%) all fell. In the alternative space, hedge fund strategies slumped, with both long short and multi-strategy managers showing declines.

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