April 22, 2016
First Quarter Highlights
- There were two distinct periods for global equity markets. During the first part of the quarter, markets fell sharply with many indices reaching bear market levels. But markets abruptly changed course in mid‐February and most indices erased the prior declines and ended with a positive return. There was a tight correlation between oil price movements and equity prices.
- U.S. Treasury bonds traded in a limited range. The more notable trend was the narrowing of credit spreads as recession concerns receded in the second half of the quarter.
Overview of the Economy
- In the U.S., the consumer side of the economy is stable to improving as shown by a higher number of new jobs and job openings, as well as increases in personal consumption expenditures and new home starts. There was some improvement on the industrial side with new orders above prior year levels.
- Europe also is showing signs of optimism but growth remains muted considering the very low interest rates and the stimulus policies in place. China continues to slow, particularly in industrial activity, exports, and retail sales.
- The European Central Bank (ECB) took easing actions that exceeded expectations. The actions included cutting the key lending rate to 0%, lowering the deposit rate to ‐0.4%, expanding the size of the monthly bond purchase program by €20 billion, and including corporate bonds in the purchase program.
- The Federal Reserve (Fed) left the fed funds rate target unchanged but revised its forecast to only two rate hikes in 2016, down from the four hikes previously forecasted.
For an in-depth analysis of the quarter, please download the PDF.