The Fed got what it wanted
The US Federal Reserve raised the target range of the federal funds rate by 25 basis points to 25-50 basis points on December 16, 2015. By doing that, the central bank tried to salvage some of its credibility, which had come into question due to prolonged easy money conditions. The Fed also achieved another thing with the hike by making it one of the most expected events. Throughout 2015, central bankers had wanted to ensure clear communication to markets so as to not provoke an extreme reaction. And they succeeded in that objective.
Is there value left in US equities?
BlackRock doesn’t seem to think so. In its 2016 Investment Outlook, the investment manager opined that US equities looked fully valued. Though they preferred equities over bonds, their inclination was towards European and Japanese equities.
2015 was a volatile year for US equities and some professional money managers expect 2016 to be even more volatile. Investors should closely watch corporate earnings this year, both at the company and industry level, in order to gauge whether particular stocks or entire industries have run up ahead of fundamentals.
US large-cap equity mutual funds
In this series, we’ll look back at how 2015 was for some US large-cap equity mutual funds. As you can see from the graph above, 2015 was mostly favorable for US large-cap equity mutual funds, though to varying degrees. Our analysis of 11 US large-cap equity mutual funds (FMAGX) (IEOPX) will not just be a look at performance. We’ll also take an in-depth look into the portfolios of these funds and conduct attribution analysis to see which sector picks and stock picks helped or hurt each fund. In this manner, you’ll be equipped with information regarding stock and sectoral bets of these funds and will be in a better position to decide whether these funds fit into your reading of companies and sectors for 2016.
We’ll begin our analysis with the American Funds AMCAP Fund – Class A (AMCPX).