Asset Class Reports
Canterbury Review: First Quarter 2016
Investor Sentiment Fluctuates as the Fed Holds & the ECB Eases
- In March, the FOMC decided to hold short-term rates steady as Chair Yellen cited caution in normalizing interest rate policy. While U.S. unemployment has remained low and labor force participation has increased, growth concerns in China and in other developing nations have resulted in a cautious approach by the Fed. Conversely, the ECB decided to increase bond purchases and to cut short-term rates to zero, reinforcing their objective of stimulating the economy and increasing inflation.
- The global equity index ended flat for the quarter, belying the volatile activity in the market. Within the U.S., large and low-valuation stocks performed well, while smaller and growth-oriented stocks declined as investors sought stability on the downside and bid up the beaten-up energy and industrials sectors as crude oil prices stabilized. Emerging markets equities also outpaced developed countries as natural resources rebounded and the dollar weakened, reversing the trend of the past 18 months.
- U.S. long-term treasury yields declined as a result of global growth concerns. Negative to low rates in Japan and Europe also had an effect on long rates as investors rotated into treasurys. Concerns over rising defaults in the high yield sector and fears of a potential recession initially led to wider spreads, however the market rebounded by quarters-end as fears subsided.
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