In the first calendar quarter of 2016, the KEELEY Mid Cap Dividend Value Fund (KMDVX) increased 3.57% compared to a 3.92% rise for the Russell Midcap Value Index. The year began under a rather ominous cloud in January as U.S. equity markets faced tremendous headwinds. The S&P 500 Index, which dropped by 9% from the end of last year through January 21, recorded its worst start to a year in the history of the Index. Fortunately, the environment quickly reversed course following the European Central Bank’s announcement to expand its stimulus efforts against low inflation. In addition, the Bank of Japan’s surprise interest rate cut (to negative territory), helped turn around the declines seen early this year. In the U.S., market participants scaled back their expectations for the number of interest rate hikes this year as the Fed observed tepid GDP growth, low inflation, and unemployment hovering around 5%. Further, as China entered a potentially lengthy low-growth phase, eyes focused on the U.S. as a global growth leader.
U.S. equity markets strengthened during February and March, closing the quarter in positive territory. However, there was wide dispersion among the various sectors during the quarter. Within the Russell Midcap Value Index, sector performance ranged from -6.0% (Health Care) to 16% (Utilities). In general, the defensive sectors performed better, but there were some outliers. The decline in the Health Care sector certainly was one of them. In addition, the second best performing sector was Materials which was led by strong gains in metals and mining and in steel in particular. Continue Reading »