First Quarter 2016 – “Deja Vu”
The U.S. stock market finished the first quarter almost where it began, with a good bit of drama in between. The S&P 500 endured its worst ever start to a new year with the widely watched index falling to a 22-month low by February 11th. Fears surrounding slower growth in China, the impact of higher interest rates from the Federal Reserve, and fallout from lower oil prices were key contributors to the sell-off. The swiftness and depth of the sell-off spooked investors and policymakers around the world. The Federal Reserved backed-off its rate-hike rhetoric and signaled a slower pace of tightening this year. Meanwhile, authorities in Europe and Japan lowered short-term interest rates into negative territory, seeking to spur bank lending and drive currencies lower with the hopes of triggering better growth conditions. In China, authorities used a combination of fiscal spending, currency weakness, and lower bank lending rates to ensure economic growth reaches its 6.5% target. Policy actions pushed global interest rates to even lower levels.