As we approach a little past the mid-way point of the year, it's always good to reflect on the first half. I can confidently say the first six months of 2016 was one of the wildest periods in recent memory. Ranging from a potential market crash in China, crumbling oil prices, rising oil prices, Brexit panic, Brexit rebound and numerous things in between.
One reason for these wild market swings could be the fact that we have less clarity on the global economy and interest rates today then we did at the beginning of the year. If you recall in December of 2015, the Fed finally raised rates for the first time in nearly 10 years and took rates from zero to 0.25%. The Fed took action and stated their plan of 2-3 rate hikes in 2016.
Seven months later we are still at 0.25% with seemingly no clarity of when the next hike will be. Also, rates have continued to drop here and around the world. Now there are talks of the Fed possible lowering back to zero or even lower. (For what it's worth we don't think this will happen). The employment picture in the U.S. hasn't helped provide any clarity with a staggeringly low May production of only 38,000 jobs (the worst since September 2010) and then a June in which a whopping 287,000 jobs were created.
The U.S. equity market has been extremely resilient as we stand near all time highs. But the issues we faced at the beginning of this year did not all resolve themselves and are likely to shed uncertainty for some time to come.
As we always stress, risk management is the most vital component for an investor. The recent large rally in the equity markets gives investors a chance to catch their breaths and hit the reset button. Many investors were caught off guard by the severe drop in January to Mid February. Now is a good time to revisit your risk profile and make sure it matches up with your comfort level.