US stocks climbed higher in March driven by support from the Federal Reserve and continued anticipation of a US/China trade deal. Officials from the US and China are planning a new round of talks in hopes of having an agreement in place by the end of April. After fourth quarter earnings topped expectations, first quarter results are expected to fall 3.8% from a year earlier potentially resulting in the first earnings decline in three years. Economic news continued to be mixed showing a cooling, but still growing economy. The February jobs report fell well short of expectations with 20,000 new hires, however the unemployment rate dropped to 3.8%, and wages grew 3.4%, the fastest pace in nearly decade. Manufacturing declined more than expected, household spending rose less than expected, and fourth quarter Gross Domestic Product rose 2.2%, less than estimated. On the positive side, new home and previously owned homes sales jumped, inflation remains subdued, and consumer sentiment rose. Oil finished the quarter at $60 a barrel, up 32% for the quarter, for its biggest quarterly gain since 2009. In March, US stocks gained 1.46% and have soared 14.04% for the quarter.
Foreign stocks gained over the month on supportive moves by central banks as well as US/China trade optimism. Industrial output and exports in China both fell well short of expectations and factory output in the eurozone fell at its fastest pace in six years. Due to the weak economic backdrop, the European Central Bank (ECB) revealed a surprise stimulus plan. The ECB said it would keep interest rates at their current levels at least through the end of this year after previously estimating they would raise rates at the end of the summer. It will also issue new inexpensive long-term loans starting in September. The central banks in Canada, Japan, and Australia kept their key interest rates steady after officials expressed concerns about growth. The British Parliament rejected Prime Minister May’s Brexit deal a third time on the day Britain was originally expected to leave the European Union. The next steps are up in the air, but Britain is expected to request a second extension past the current April 12th deadline. Emerging markets outpaced developed markets in March, but slightly trailed developed markets over the first quarter. International stocks were up 0.68% in March and have climbed 10.26% for the year to date.
Bonds surged over the month as interest rates fell driven by global growth worries. At the conclusion of the Fed’s March meeting they announced they would not raise the Fed Funds rate and are unlikely to do so this year over concerns about slowing US growth. They may be near the end of the current interest rate raising cycle that began over three years ago. They will begin slowing the reduction of their bond portfolio in May and end the runoff at the end of September. The Fed Funds rate is currently set at a range of 2.25% to 2.5%. The 10-year Treasury yield sank over the month to end at 2.41% down from 2.73% to start the month and 2.68% to start the year. The yield curve inverted for the first time since 2007 as well. For the month and quarter, credit and muni bonds were the top performing sectors and longer-term bonds topped shorter-term bonds. The broad bond market jumped 1.92% in March and gained 2.94% in the first quarter.
|Index Performance||March||1Q||Trl. 1 Yr.|
|US Stock (Russell 3000)||1.46%||14.04%||8.77%|
|Foreign Stock (FTSE AW ex US)||0.68%||10.26%||-3.94%|
|Total US Bond Mkt. (BarCap Aggregate)||1.92%||2.94%||4.48%|
|Short US Gov. Bonds (BarCap Gov 1-5 Yr)||0.86%||1.22%||3.17%|
|Municipal Bonds (BarCap 1-10yr Muni)||0.88%||2.21%||4.63%|
|Cash (ICE ML 3Month T-Bill)||0.22%||0.60%||2.12%|