China’s first corporate bond default and weak trade data including an unexpected trade deficit look like they will give the market a little case of the Monday doldrums. However, last week’s better than expected jobs number and a steadily improving economy have justified the Fed’s tapering timeline. In turn investors are increasingly worried about rising rates. Rates will rise eventually but investors fleeing bonds in anticipation were surprised when all bond classes posted positive returns in February. Notably long treasury bonds, the most interest rate sensitive, were positive illustrating the point that it is folly to try to game diversification. Bonds offer necessary risk control and diversification in a portfolio at all times and some bond classes such as Senior Loans have flourished during periods of rising rates such as in 2004-2006 when the Fed raised rates 17 times. Please see the latest Global Perspectives commentary for the latest look at investing in these markets.
The Latest Market Commentary From Our Strategists
Weekly Commentary & Statistics
Though tensions in Ukraine inspired a sharp Monday selloff, equity markets rebounded to post another week of gains — and another round of record highs in the case of the S&P 500 — thanks to mostly strong economic data. Yield on benchmark ten-year Treasuries hit a six-week high during the week.
Monthly Commentary & Outlook
While recent equity pullbacks have provided under-exposed investors with attractive opportunities to re-enter the market, many remained spooked by memories of 2008.
Market risk remains low, with potentially disruptive macro events quickly discounted; this may lure investors back into equities where strong returns have failed.
Many emerging economies have struggled this year, but they are generally better positioned to withstand a currency assault than they were in 1997.
A plan that effectively balances building wealth and controlling risk better positions investors to pursue their goals in all seasons.