Earlier today we held our monthly “Portfolios at Panera” event.  The last Thursday of each month we spend an hour talking with clients and friends about what is happening in the markets and how those happenings are impacting client portfolios. In addition to talking about “hot topics” such as the British referendum to potentially leave the European Union, and when the Fed might raise interest rates, we spent a good deal of time looking at forecasts of which asset classes are likely to have the best (and worst) performance over the next five years.

While teaching a professional development class in Minnesota this week The Joseph Group’s Chief Investment Officer, Travis Upton, had the opportunity to visit with the portfolio management team at the Minneapolis-based investment firm, The Leuthold Group. Travis was able to talk with a number of the portfolio managers at the firm, including Leuthold Chief Investment Officer, Doug Ramsey. Here are two key takeaways from the meetings:

Here in Central Ohio, as fans filled out their brackets, one team was noticeably absent from the 64 (or 68 if you include the Thursday games) teams in the NCAA tournament – the Ohio State Buckeyes.  The Ohio State men’s basketball team got off to a rough start this season, losing three straight games in the Basketball Hall of Fame Invitational in November to supposedly inferior teams. Like the Ohio State men’s basketball team, the U.S. stock market also got off to a bad start – the worst start to a year in history as the market was down over -8% in the first 10 trading days of the year.  However, unlike the Buckeyes, the stock market is getting the chance to “start over.”

We know markets are tough, but what areas are doing better than others?

The biggest question on clients’ minds – Does the rough start for the market this year foreshadow the coming of a bigger bear market? Looking at a graph showing some of the worst 10-day starts to a year remind us positive returns could be in store for 2016.

In the first four trading days of 2016, U.S. stock market indexes have declined approximately -5%, the worst four day start to a year for the Dow and S&P 500 in history, according to FactSet data going back to 1897.  The catalysts for the decline seem like an almost exact replay of last August’s correction – news of slowing economic growth in China, China devaluing their currency, and the Chinese government interfering with free operation of their stock market. Let’s look at each piece to discuss what is happening:

As this note is being written on the last day of the year, the Dow is down over 100 points, capping off a year of flat to negative returns for major stock indexes in 2015. Looking at how things stand in December, here are a few observations:

Yesterday the Federal Reserve increased the Fed Funds rate by 0.25%, effectively ending a 7 year period of zero interest rates. The move in rates was widely expected, but the main event was what Fed Chair Janet Yellen said about the future…

This week, three charts particularly caught the attention of The Joseph Group’s investment committee as we discussed what is happening with markets and what is likely to happen going forward.

This past week, all eyes were on Congress and the debt ceiling negotiations. A budget deal was struck, but there were a couple important provisions of that bill not being talked about which impact Social Security claiming options. Specifically, two key strategies were targeted which are now being phased out.