Market Digest – Week Ending 4/1
Stocks gained for the week, pushing the S&P 500 into positive territory for the first quarter. This was quite a feat considering the index was down over 10% as of February 11th. Comments by Fed Chairwoman Yellen suggesting rate increases may have phased in slowly encouraged buyers, as did a strong jobs report released Friday. The dollar fell and bonds rose. Oil fell due to reports that Saudi Arabia may not curb production.
S&P 500: 2,073 (+1.8%)
FTSE All-World ex-US: (+0.9%)
US 10 Year Treasury Yield: 1.77% (-0.13%)
Gold: $1,222 (-0.4%)
USD/EUR: $1.139 (+1.9%)
- Monday – Consumer spending rose by just 0.1% in February, while the personal consumption expenditures index (a measure of inflation) rose just 1% from a year ago.
- Monday – California governor Jerry Brown told legislators he supports raising the state minimum wage to $15 by 2022.
- Monday – The US government withdrew a lawsuit against Apple to unlock an encrypted phone after the government said it figured out how to do it on its own.
- Tuesday – Janet Yellen reiterated a cautious stance on the global economy and hinted at a slower path to increase rates.
- Tuesday – SunEdison, a US solar company said it is at substantial risk of bankruptcy.
- Wednesday – Pfizer and Allergan said federal regulators are seeking more information on their pending inversion.
- Friday – US employers added 215,000 jobs in February, which was above expectations.
- Friday – North Korea fired a missile into the sea in a show of force as Obama met with Asian leaders to discuss how to curtail the country’s nuclear program.
The first quarter came to a close on Thursday. If you weren’t paying attention along the way, market returns were pedestrian. The S&P 500 returned 1.3% and the FTSE All World ex-US lost 0.3%. However, if you were watching day- to-day, it was a white knuckle ride. The S&P fell 1.4% on the first trading day of the year and proceeded to have its worst starting week on record and worst January since 2009. February started the same way and by February 11th, the global stock market rubbed up against the technical definition of a bear market, down 19.7% from a high last spring. Many international markets firmly entered bear market territory.
Headlines in January and February focused on doomsday scenarios of crashing oil prices and a rapidly decelerating Chinese economy. Then, as markets often do, things reversed for no concrete reason. Even more accommodative central bank support globally helped rally enthusiasm. Markets also reacted positively to a potential deal by major energy exporters to freeze oil production.
After years of US stock leadership over most or all other asset classes, the benefits of diversification resurfaced in Q1. US stocks again bested international stocks, but US bonds, international bonds and alternatives like REITs and gold outpaced stocks. We continue to strongly believe a diversified and disciplined approach with allocations to all of these asset classes will serve most investors best over time – and see this as especially important over the coming few years.