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Q4 Kayne Anderson Rudnick

Virtus Viewpoints:
A New Year, A New Decade

2019 IN REVIEW
As we begin a new decade, we would like to wish everyone a happy new year! Equity investors enjoyed extraordinary returns in 2019. After a very weak fourth quarter 2018, stocks recovered all those losses and more last year. U.S. large-capitalization stocks returned 31.49% (S&P 500® Index), small-capitalization stocks returned 25.52% (Russell 2000® Index), and international developed markets were up 22.01% (MSCI EAFE® Index). Despite a trade dispute, emerging market stocks still managed a robust return of 18.42% (MSCI EM Index). Growth stocks continued to outperform value stocks despite the threat of potential regulatory changes for large technology companies in 2019.

Fixed income also had a very good 2019, with the Bloomberg Barclays U.S. Aggregate Bond Index returning 8.72%, primarily due to the decline in the 10-year U.S. bond yield from 2.68% at the start of the year to 1.92% by year-end. Falling interest rates propelled positive returns across the board in fixed income. Emerging market debt (+14.42%, EMBI Global Index) and high yield (+14.41%, ICE BofAML U.S. High Yield Index) were the standout performers. Municipal bonds also appreciated in 2019, +7.54% (Bloomberg Barclays U.S. Municipal Index).

z - Cover Image: KAR Market Review and Outlook

The S&P 500® Index is a market capitalization weighted index which includes 500 of the largest companies in leading industries of the U.S. economy. Small-capitalization stocks are represented by the Russell 2000® Index which is a market capitalization-weighted index of the 2,000 smallest companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. Developed international markets are represented by the MSCI® EAFE Index which is a free float-adjusted market capitalization index that measures developed foreign market equity performance, excluding the U.S. and Canada. Emerging markets are represented by the MSCI® Emerging Markets (EM) Index which is a free float-adjusted market capitalization index tracking the equity performance of global emerging markets. The Bloomberg Barclays U.S. Aggregate Bond Index is a market value weighted index that tracks the daily price, coupon, pay downs and total return performance of fixed-rate, publicly placed, dollar-denominated and non-convertible investment grade debt issues with at least $250 million par amount outstanding with at least one year to final maturity. Performance is calculated on a total return basis with dividends reinvested. The ICE BofAML US High Yield Index tracks the performance of U.S. dollar denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market. The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prefunded bonds. The J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) includes U.S.-dollar-denominated Brady bonds, Eurobonds, traded loans, and local market debt instruments issued by sovereign and quasi-sovereign entities.

The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

Past performance is not indicative of future results.

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