SVB Wealth Advisory Market Review — Q3 2015

U.S. Equities

After posting positive returns in the first two quarters of the year, the S&P 500 declined 6.4% in the third quarter of 2015. This represents the first negative quarter for the index since the fourth quarter of 2012 and the worst quarterly decline in four years. Although concerned about the sharp drop in the China stock market in June, U.S. investors didn't fully react due to the continued growth and relative strength of the domestic economy. In August, persistent struggles in China combined with dropping global hard asset prices, a strengthening U.S. dollar and uncertain monetary policy amplified fears of a global economic slowdown. Speculation surrounding what the Federal Reserve will do, and its ultimate inaction in September, contributed to the quarter's increase in volatility. All sectors of the S&P 500 declined during the quarter, except for Utilities (+5.4%). The Biotech sector was the worst performer for the quarter (S&P Biotechnology Select: -26.0%), ending its amazing 5+ year run.


WAMP Market Review S&P 500


International Equities

As could be expected from the decline in the China market, broad emerging markets underperformed their developed counterparts: the MSCI Emerging Markets dropped 17.9% during the quarter while the MSCI EAFE dropped 10.2% during the same period. Even a healing European economy could not outweigh the macro global fears exacerbated by China. For the year, developed economies (S&P 500: -5.3%, MSCI EAFE: -5.3%) performed only slightly better than China (Shanghai Composite: -5.6%) although they arrived there in very different ways, as illustrated in the following graph:


WAMP Market Review YTD


Fixed Income

Fixed Income securities produced slightly positive returns for the quarter, except high yield. The Barclays Municipal 1-10 Year Blend returned +1.3% for the quarter, driving the year-to-date gain to 1.6%. Taxable domestic and international bonds also experienced an increase with the Barclays U.S. Aggregate up 1.2% and the Barclays Global Aggregate ex U.S. up 0.6% for the quarter. While the Barclays U.S. Aggregate climbed into positive territory for the year (+1.1% YTD), the Barclays Global Aggregate ex U.S. still has a long way to go to reach a positive level (-4.8% YTD). The BofA Merrill Lynch High Yield Master II lost 4.9% in the third quarter.



The Fine Print

This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice, nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice, before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction. Past performance is not a guide to future performance. Opinions and estimates are as of a certain date and subject to change without notice.

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About the Author

Thomas O’Keefe is the Head of Investment Strategy, responsible for portfolio construction, manager due diligence and market insights. He is focused on driving investment solutions at a firm and client specific level.

Prior to joining SVB, Thomas spent 7 years with Hall Capital Partners, an investment advisor in San Francisco, CA for ultra-high net worth families and institutions. During his tenure with Hall, he contributed in structuring, analyzing and managing portfolios with a balance of optimizing performance, tax efficiency, risk preference and account organization.

Thomas graduated from the Santa Clara Leavey School of Business with a BS in Finance and earned an MS in Financial Analysis from the University of San Francisco. Thomas holds the Chartered Financial Analyst (CFA) and the Chartered Alternative Investment Analyst (CAIA) designations and is a member of the CFA Society San Francisco.