So much for the traditional ‘Santa Claus rally.’ In a quiet holiday shortened week, the markets put a wrapper on a disappointing year for nearly all major asset classes. In fact, Societe Generale reported that 2015 was the worst year for finding returns since 1937 and ranks as the third worst year ever as stocks (S&P 500), bonds (30yr UST), cash (3mo T-bill), and commodities (CRB Index) all underwhelmed return seeking investors. This environment proved very difficult for diversified investment strategies as well as the less constrained hedge fund complex, the average of which lost 4% in 2015.
The final week of 2015 brought little to bear with thin volume and a light economic calendar. Overall, markets saw swings in oil prices matched with swings in equities, both ending in the red on the week, while rates increased slightly across the curve. Fed officials did convey early observations of success in their utilization of the Fed’s fixed-rate reverse repurchase agreements to set a floor under short term borrowing rates. This is one of the primary tools utilized by the Fed to achieve the announced 0.25% increase in the Fed Funds rate announced last month. From an economic standpoint, positive readings in December’s consumer confidence from the Conference Board and home prices from Case Shiller provided support to markets mid-week. Confidence readings rebounded to 96.5, up from 92.6 in November while home prices posted their second consecutive 5.5% monthly gain in October.
