At the tail end of what had been a relatively quiet quarter, global stock markets suffered a sharp two-day sell-off following the surprise vote on June 23rd by the United Kingdom to exit the European Union.  Despite the dire predictions made immediately after the vote, the decline was short-lived.  The major global indices rebounded to pre-Brexit levels or higher by the end of the quarter.  In fact, the second quarter ended on a positive note for most asset classes.

Asset class returns for the quarter and year-to-date were as follows:

 

Index

 

Asset Class

Second Quarter 2016

Year-To-Date

2016

 Barclays U.S. Govt./Credit—Int.

 Fixed Income

 1.6%

 4.1%

 S&P 500

 Large U.S. Stock

 2.6%

 3.8%

 Russell 2000

 Small U.S. Stock

 3.8%

 2.2%

 MSCI ACWI ex-USA

 Foreign Stock

-0.6%

-1.0%

 S&P Global REIT

 Real Estate Securities

 4.5%

11.7%

 

On May 10th, Dowling & Yahnke celebrated its 25th anniversary.  In 1991, Mark Dowling and Dale Yahnke conceived of a firm that would provide objective advice to investors, free from the inherent conflicts in the then-prevailing brokerage model based on commission-based product sales.  In contrast, Dowling & Yahnke would provide independent advice with a transparent fee structure.  From the beginning, the firm has been focused on providing its clients with a tax-efficient, broadly-diversified investment portfolio tailored to their specific needs.  Dowling & Yahnke has always acted as fiduciaries, putting its clients’ interests first.

As we celebrate this milestone, we reflect on how the firm’s principles and investment philosophy have helped clients successfully navigate the ups and downs of the stock market.  Over the past 25 years, the global stock market has weathered numerous geopolitical and financial crises.  In every case, it has recovered and continued to grow despite an initial decline.  The chart below shows some of those events and the global stock market trajectory going back to 1970.  

Growth of a dollar - MSCI World Index (net dividends), 1970-2015

Source:  Dimensional Fund Advisors, in U.S. dollars.  Indices are not available for direct investment.  MSCI data© MSCI 2016, all rights reserved.

In the late 1990s, the Asian Financial Crisis was ignited by the collapse of the Thai baht and quickly spread throughout the region.  The decade also witnessed the dissolution of the Soviet Union, the first Gulf War, and the dot-com boom.  The onset of the 21st century brought the dot-com bust and subsequent recession.  The bear market was intensified by the September 11, 2001, attacks and the wars in Iraq and Afghanistan.  Market confidence was further eroded by revelations of corporate misconduct at major companies including Enron, Worldcom, and Tyco.  More recently, we have experienced the 2008 global financial crisis, the U.S. housing bust, and the rise of global terrorism.

In spite of the negative headlines, the chart illustrates the long-term resilience of the stock market and provides us with reason for optimism for the future.  We continue to believe, as we have over the last 25 years, that a disciplined, long-term approach to investing based on appropriate asset allocation, timely rebalancing, and tax sensitivity is the key to a successful investment experience.

Looking back, Dowling & Yahnke has thrived because of the confidence our clients have placed in us as their trusted adviser.  By hiring ethical, intelligent, and caring professionals and consistently applying sound long-term investment principles and common sense, we have created a client-centric culture which embodies the words of Mark Dowling:  “Take care of your clients the way you would take care of your own mother.”  This principle will continue to guide us through an era of accelerating change, unknown challenges, and unlimited opportunity.  We greatly appreciate the personal and professional relationships we have built over the last quarter century.  We look forward to strengthening these connections with our clients as well as with the greater San Diego community over the next 25 years.

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