The rally in global markets continued throughout March as the Fed returned to its dovish ways and the ECB moved to expand its stimulus package. A recovery in domestic credit markets, spurred by another rate cut in the Eurozone, fuelled the rally, with global equities returning 6-8% and high yield bonds 4%. While gains were broad based across market cap and style (value and growth), recent laggards – emerging markets, energy, commodities, small caps – led the pack. Treasury yields remained volatile during the month but ended up largely flat during the period, demonstrating the hyper sensitivity of bond investors to Fed actions given the expectation of multiple hikes this year.
  • Core inflation (CPI ex housing and energy) jumped to 2.3% in February, its fourth consecutive month over 2%, and is firming at levels not seen since 2012; the recent jump was due to strong price increases in healthcare and apparel (J.P. Morgan)
  • The Federal Reserve expanded its criteria for determining interest rate policy to include global economic conditions and lowered its expectation of 2016 interest rate hikes from four (4) to two (2)
  •  The European Central Bank's (ECB) decision to expand its bond purchases to include high grade corporates helped support the rally in U.S. corporate bonds as lower yields in European issues result in making U.S. issues bonds more attractive on a yield basis
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Notes: 1) Sources: Bloomberg, J.P. Morgan Asset Management, Morningstar, Hedge Fund Research, Bureau of Labor Statistics, Bureau of Economic Analysis. 2) Data as of the date of this report unless otherwise noted. 3) U.S. GDP measures the percentage change during the referenced quarter as published by BEA. 4) Consumer Price Index for All Urban Consumers: U.S. City Average, All Items Less Food and Energy is based on 12-month percent change as published by BLS. Disclosures: This material is provided for informational purposes only and does not constitute an offer or solicitation by HFS, or its subsidiaries or affiliates, to invest in these indices or their constituent products. The data contained herein are from referenced sources which HFS believes to be reliable. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. The views expressed are those of HFS. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Investing involves a high degree of risk, and all investors should carefully consider their investment objectives and the suitability of any investment. Past performance is not necessarily indicative of future results. All data is as of the date of this report unless otherwise noted.
 


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