The strengthening U.S. dollar (USD), a trend that began in 2011 and gathered steam in 2014, cooled during the first quarter of 2016.One of the primary factors driving down the value of the USD included numerous dovish remarks by Federal Open Market Committee (FOMC) Chair Janet Yellen and other Federal Reserve officials, who focused on the future path of monetary tightening.
The U.S. stock market posted a tepid positive return that masked a drop of over 10% at one point during the quarter. Emerging markets outperformed developed markets both domestically and abroad. Long duration fixed income securities rallied as rates dropped while absorbing a more dovish U.S. Federal Reserve policy. REITs remained strong, commodities ended essentially flat, and the struggles facing MLPs continued. Skillfully managed global macro strategies within the broader diversifying strategies category posted solid returns.
Without a doubt, I knew I was in a different place when I stepped foot in India. I knew I was in an emerging market. India hits all five of your senses— some good and some that tested my strength to not use profanity. The sights can be amazing (the Taj Mahal), or they can be disturbing (take my word for it) for the unprepared and insulated American. The sounds are different: tuk tuks (small motorized rickshaws) everywhere, more than 20 official languages, and activity like almost nowhere else on the planet.
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Over the past year we have written about energy markets, an evolving China, and increased competition in private capital. Additionally, we highlighted the role of limited partnership advisory boards, one of our forms of control as private fund investors. Our Focus Topic this quarter highlights the past year and our outlook for an expectedly eventful 2016. Across the board, despite the normal positive expectations around an election year in the U.S., it appears to be a time for reassessing risk and sizing up risk tolerance.