Investors remain bullish year to date as both sentiment and improving fundamentals contributed to the recent run-up in equities.
The expectation of business-friendly policies coming from the new administration sparked animal spirits (human emotion that drives consumer confidence and trust) in the market.
Market exuberance is displayed by the Dow’s 2,000 point run-up in 66 days. Previously it took almost two years for it to go up 1,000 points.
Domestic large cap stocks continue to outperform small cap stocks. Growth styles are outperforming value styles year to date.
Developed international equities underperformed in the U.S. markets in February, but have more potential for upside long term based on valuations.
Our long-term outlook for emerging market equities remains positive. This was borne out in year-to-date returns, up nearly 9%.
Financial markets have priced in expectations of a fiscal stimulus, higher interest rates, rising inflation, and a stronger U.S. dollar.
The Fed raised short-term interest rates 0.25% in December. Rates were left unchanged on February 1. The committee forecasts 3 additional rates hikes in 2017, presuming the economy and job market continue to improve.
Despite OPEC's agreement to cut production in November, oil prices have remained in the low $50s per barrel based on lower demand and increased U.S. production.
It was an uneventful month in the U.S. bond market with rates remaining virtually unchanged year to date.
The high-yield bond market continued its multi-year rally, up another 1.46% in February.
- This information has been compiled using data and other statements of fact derived from sources which we believe to be accurate and reliable. However, such data and other statements of fact have not been verified by us, and we do not make any representations as to their accuracy or completeness. Any opinion expressed herein reflects our judgment at this date and is subject to change.