A Year-End Letter to Clients: Why I’m Optimistic

Dan Richards

Since 2008, I have posted a quarterly template for a client letter, as a starting point for advisors who want to send clients an overview of the period that just ended and some thoughts looking forward. Advisors tell me they get a great response to these letters – the year-end letters are especially popular.

Use as much of the content below as is appropriate for you, adding or deleting to reflect your views. Here are the components of the year-end letter for 2015:

  1. An overview of 2015 performance
  2. Putting perspective on negative news
  3. Brief thoughts for the period ahead

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Dan Richards
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A year-end letter to clients: Why I’m optimistic – and why you should be too

I am writing to summarize market performance in 2015 and to briefly share some thoughts on the outlook for the period ahead. These days, most newspaper headlines paint a dim view of the future. Without dismissing the very real issues that we are facing around the world, I want to share why we should be optimistic about the future.

But first, here’s an overview of how last year’s markets performed.

2015 stock market performance

Four macroeconomic factors cast a big shadow over markets in 2015 – uncertainty about the timing of the interest rate increase by the Federal Reserve Board that finally materialized in December, the impact on corporate profits from oil prices that fell by over 30%, a rising U.S. dollar and questions about growth in China.

Stock prices were more volatile in 2015. After a relatively quiet first half, concerns about Chinese growth led to a sharp decline in stock prices in the third quarter – although the fourth quarter saw a recovery sufficient to leave our stock market positive for the year as a whole

2015 U.S. Stock Market Performance





Total Year






Total return including dividends; Source: MSCI

Rise of the FANGs

After double-digit gains in each of the previous three years, a pause in growth in prices was inevitable at some point. A key driver of sideways stock prices was flat corporate profits after an 8% increase in 2014. The backdrop to flat profits is outlined in a Wall Street Journal article, Falling Corporate Profits Blur U.S. Growth Outlook.

With a sharp decline in the price of oil, the energy sector saw a sharp drop in profits and share prices for this sector fell by 26%. Other sectors whose stock prices declined were materials, down 10% as demand for minerals and other commodities declined and utilities, which dropped by 8% in anticipation of an increase in interest rates.

The stronger dollar hurt profits in two ways: Companies relying on exports were challenged as the cost of their goods increased in foreign markets. And second, for multinationals the rise in the dollar led to a decline in the value of profits in their overseas subsidiaries.

Offsetting the weakness in energy was strength in companies that focused on the domestic consumer. Particular strength was shown by the four technology companies known as the FANGs – Facebook (+36%), Amazon (+122%), Netflix (at +131% the top performing U.S. large company stock last year) and Google (+49%).

Even with a flat 2015 and the big decline in 2008, for patient investors who stayed the course, over the past 10 years the compound annual return on the U.S. stock market still exceeded 7%.

Annual change in U.S. Stock Market











10 yr return*












Total return including dividends

*compound annual return

Source: MSCI

Stocks around the world

Even with a flat return in 2015, U.S. markets continued to outperform the rest of the world, with emerging markets continuing their weak performance over the past five years. These returns are in local currency – if translated to U.S. dollars, the rise in the U.S. dollar would have made the gap between U.S. stock market performance and the rest of the world over the past five years even more pronounced.




Emerging Markets







3 years





5 years





10 years





Total annual compound returns including dividends to December 31, 2015 in local currencies

Source: MSCI