Financial Markets Monitor

Q2 2017: Financial Markets Monitor (PDF)
U.S. economic expansion is on solid ground, aided by improving growth trends overseas. Despite full valuations the equity bull market is intact, supported by:

  • Low recession risk and tame inflation
  • A gradual path for interest rate hikes by the Fed
  • Earnings growth, with potential upside from corporate tax cuts

Q1 2017: Financial Markets Monitor (PDF)
Donald Trump’s pro-growth message spurred a post-election U.S. equity rally. Domestic stocks again outperformed most foreign markets, as the strong U.S. dollar suppressed overseas returns. A post-election sell-off left investment-grade bond returns barely in positive territory for the year. The high-yield market rallied in sympathy with equities.

Q4 2016: Financial Markets Monitor (PDF)
A post-Brexit rally has pushed global returns higher. International equities have lagged U.S. for longer time periods. Strong bond returns were supported by weak global growth and a status quo Fed. High-yield bonds have performed well following the 1Q nadir.

Q3 2016: Financial Markets Monitor (PDF)
Performance of the U.S. economy is uneven. Investment, manufacturing and international trade are lagging. A confluence of events, including weakness in corporate profits, a struggling energy sector, sagging overseas demand and a strong U.S. dollar have depressed these sectors.

Fixed Income

Q1 2017: Fixed Income Market Review (PDF)
Despite the growing acceptance around rate normalization, longer-term rates are lower since the March tightening, and odds of future rate increases have diminished for a number of reasons.

Q4 2016: Fixed Income Market Review (PDF)
U.S. Election results had a much greater impact on market yields. Expansionary fiscal policy, potentially funded by an increase in the budget deficit, is projected to increase inflation and reduce the need for extraordinary monetary policy.

Q3 2016: Fixed Income Market Review (PDF)
The Fed raised expectations for higher short-term rates prior to year-end, but also signaled lower rate projections than previously communicated for 2017 and beyond.

Q2 2016: Fixed Income Market Review (PDF)
The UK referendum to leave the European Union briefly disrupted markets. Interbank funding and public sector credit spreads give no indication of systemic risk.