On Top of the Market Chart Book - "Global Equities Inch Forward in the First Quater"
GLOBAL MARKET PERFORMANCE
After a robust 2013, U.S. equities fell in January before rising again in February and March — eking out small gains for the first quarter of 2014. Large-cap equities outperformed small caps, with the S&P 500 up 1.8% and the Russell 2000® up 1.1% for the quarter. Foreign developed equities continued to outpace Emerging Markets, as European economic growth improved. Slowing economic growth concerns continued for Emerging Markets, particularly China, while the Ukraine and Russia experienced geopolitical turmoil. REITs and Gold rebounded from a challenging 2013 and outperformed global equities during the quarter. Fixed Income assets, as measured by the Barclays U.S. Aggregate Index, also reversed the negative trends of 2013 in the first quarter, as the 10-Year U.S. Treasury yield declined 32 basis points.
EXPECTATIONS FOR FEDERAL FUNDS RATE
After the March 18-19 meeting of the FOMC, Janet Yellen stated the Federal Reserve could end its massive bondbuying program this fall and start raising the main interest rate as early as six months later, which was ahead of the futures market’s expectations. In response to Yellen’s comments, futures traders moved to price in an initial interest rate hike as early as April 2015, a couple months ahead of previous expectations for July 2015. The FOMC said it would look at a wide range of data, including currently low inflation levels, to determine when to raise the main interest rate from zero. They also backed away from a previous pledge to consider raising rates only when the unemployment rate declines to 6.5%. The median target interest rate forecasted by FOMC participants was 1.0% at the end of 2015 and 2.25% in 2016, due to upgraded expectations for gains in the labor market. Unsurprisingly, the central bank announced it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55B from $65B.
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