US stocks soared again in February posting record highs driven by expectations for the new administration and solid corporate earnings. With nearly all firms in the S&P 500 reporting, earnings grew at a 4.9% rate in the fourth quarter topping estimates of a 3.2% increase. Economic news was generally solid during the month with 227,000 new hires added in January, though the unemployment rate ticked up to 4.8% and wage growth rose 2.5% down from the 2.9% in December, manufacturing expanded topping expectations, retail sales beat estimates and inflation is up 2.5% over the past year. US stocks jumped 3.72% in February bringing the year to date performance up to 5.67%.
Foreign stocks gained as well in February driven by an improving growth outlook. Similar to the US, international corporate earnings have been solid. Eurozone businesses grew more upbeat in February with confidence reaching the highest level since before the financial crisis. Investors are concerned over elections this year in France, the Netherlands and Germany given the anti EU candidates who could make headway. China posted an increase in factory activity for the 8th straight month. Emerging markets outpaced developed markets over the month. In February international stocks rose 1.74% raising the year to date performance to 5.22%.
Bonds rose in February as interest rates dropped. The Fed kept rates unchanged at its meeting early in the month, however minutes from the meeting showed they are poised to raise the Fed Funds rate as soon as their March meeting based on an improving economy and the possibility of more spending and less taxation from the new administration. Fed Chief Yellen and other Fed governors echoed these sentiments in speeches during the month. The 10 year Treasury yield ended the month at 2.36% down from 2.45% at the end of January. For the month longer term bonds outpaced shorter term bonds and credit and muni bonds were the top performing sectors. The broad bond market rose 0.67% in February and is up 0.87% for the year to date.
| Index Performance | Feb. | YTD | Trl 1Yr |
| US Stock (Russell 3000) | 3.72% | 5.67% | 26.29% |
| Foreign Stock (FTSE AW ex US) | 1.74% | 5.22% | 20.24% |
| Total US Bond Mkt. (BarCap Aggregate) | 0.67% | 0.87% | 1.42% |
| Short US Gov. Bonds (BarCap Gov 1-5 Yr) | 0.15% | 0.34% | 0.05% |
| Municipal Bonds (BarCap 1-10yr Muni) | 0.66% | 1.43% | 0.01% |
| Cash (ICE ML 3Month T-Bill) | 0.04% | 0.09% | 0.39% |