Quarterly Performance Update

Brexit Rocked the Global Markets’ Status Quo

Second Quarter 2016

Download the full PDF version, which includes a table of standardized performance for our entire fund lineup and benchmark indices for comparison.

Until late June, the second quarter was shaping up to be another period characterized by familiar global economic concerns and investor responses. The June 23 Brexit vote proved to be the quarter’s defining event, triggering a severe two-day global stock market sell-off followed by a strong three-day rally. Meanwhile, the resulting uncertainty was a boon for bonds.

For most of the quarter, the status quo reigned. Global economic growth remained sluggish, corporate earnings growth slowed, oil prices continued to recover, and inflation was muted. Central banks in Europe, Japan, and China maintained accommodative policies, while the Federal Reserve (Fed) kept investors guessing as to the timing of its next move. Then came the surprising Brexit vote. Stock prices and bond yields plunged on fears a U.K. departure from the European Union (EU) would trigger a global recession and threaten the future of the EU. After a severe two-day stock market sell-off, cooler heads prevailed and a stock market rally ensued. Investors concluded the U.K.’s long EU exit strategy may not have as dire an impact as originally feared. Additionally, Brexit uncertainty led to expectations for continued central bank accommodation, which lifted investors’ spirits at quarter-end.

Boosted by gains in May and the three-day rally that closed out June, the S&P 500® Index advanced for the quarter, up +2.46%. But developed markets elsewhere generally declined (in U.S. dollars, which rallied versus most currencies other than the yen), unable to fully recover in the quarter-end buying binge. Weakness in Europe dragged down the MSCI EAFE Index, which declined -1.46%. Meanwhile, emerging markets finished the quarter up +0.66% (MSCI Emerging Markets Index). The limited effect the Brexit decision should have on emerging market economies— combined with likely additional delays in the Fed’s rate normalization plans, which should aid emerging markets— supported the asset class.

As common themes of weak global growth, low inflation, and central bank accommodation continued, global fixed-income returns climbed higher. U.S. Treasury yields declined but remained relatively more attractive than government bond yields elsewhere, while U.S. corporate bonds rallied on investor demand for yield. All other major U.S. bond sectors advanced, too, and the Barclays U.S. Aggregate Bond Index gained +2.21%. Outside the U.S., European bond markets were among the best performers, led by the U.K. The U.S. dollar was mostly stronger against major foreign currencies (with the notable exception of the yen), reducing non-U.S. bond market returns for unhedged U.S. investors.

The opinions expressed are those of American Century Investments (or the fund manager) and are no guarantee of the future performance of any American Century Investments fund. This information is for educational purposes only and is not intended as investment advice.

©2016 Standard & Poor's Financial Services LLC. All rights reserved. For intended recipient only. No further distribution and/or reproduction permitted. Standard & Poor's Financial Services LLC ("S&P") does not guarantee the accuracy, adequacy, completeness or availability of any data or information contained herein and is not responsible for any errors or omissions or for the results obtained from the use of such data or information. S&P GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE IN CONNECTION TO THE DATA OR INFORMATION INCLUDED HEREIN. In no event shall S&P be liable for any direct, indirect, special or consequential damages in connection with recipient's use of such data or information.

Source: MSCI. Morgan Stanley Capital International (MSCI) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.

Source: Barclays Indices

For detailed descriptions of indices or investing terms referenced above, refer to our glossary.

Ready to Invest?