April market review

April 10, 2014

Shortly after the end of each month, our Chief Investment Strategist provides highlights of the market and our funds’ performance. Following is a summarized review of April — 

Markets

  • Global financial markets posted mixed performance for April. US equities were similarly mixed with small cap equities posting declines, while large cap equities recovered from intra-month losses to post a narrow gain for the month.
  • The S&P 500 returned 0.74% for April and 2.56% for Y-T-D. The Russell 2000 Growth Index was the worst performing US equity index, down -5.13% for the month, and down -4.67% Y-T-D. The Russell 2000 small cap index was down -3.88% for April, and down -2.80% Y-T-D.
  • The Developed International equity index, MSCI EAFE, was up 1.45% for the month and up 2.12% Y-T-D.
  • Emerging markets (MSCI EM) ended the month of April up 0.33%, but still down -0.10% Y-T-D.
  • The Japanese Nikkei 225 was down -3.53% in April and -12.20% Y-T-D. This underperformance was accompanied by a rise in the Yen.
  • Government bond yields were down across the curve. In April, the 10-year Treasury yield was down 7bps to 2.65%, down from 2.72% in March and the 30-year Treasury yield was down 10bps to 3.46% from 3.56% in March. The Federal Reserve again left the overnight lending rate unchanged at 0-0.25%.
  • Corporate bond prices increased in April. The Barclays Aggregate Index was up 0.84% for the month and 2.70% Y-T-D. The Credit Suisse Leveraged Loans Index (bank loans) was up 0.23% for April and 1.52% for Y-T-D.

Economic & Geopolitical Headlines

  • Politically, Russia and the Ukraine continued to garner attention. Economically, there was much speculation regarding whether the slow economy would rebound since the bad weather had passed. Also in the news were the start of earnings season for public companies and speculation about the Fed and its continued “tapering” of asset purchases.
  • The ISM manufacturing index had a 1.2 increase in April; US PMI was at 54.9, up from 53.7 in March, indicating expansion in manufacturing for the 11th consecutive month. Global PMI numbers show that manufacturing continues to strengthen throughout the world. A reading above 50 is considered economic expansion.
  • Chairwoman Janet Yellen gave a series of speeches and held another press conference in which she further clarified her positions on asset purchases and the Fed’s plans. In its April meeting, the Fed continued the process of “tapering”. The market, again, greeted this as an indication that the Fed believes the economy is still strong enough to function on its own, with less fiscal stimulus and support.
  • Hiring surprisingly surged last month as the economy added 288,000 net new jobs (the best performance in more than two years) and the unemployment rate dropped to 6.3%, down from 6.7% in March, its lowest level in 5½ years. Job-creation figures for February and March were revised upward by a combined 36,000, meaning the economy has added a monthly average of about 214,000 positions this year. These revised numbers are an improvement over previous months when winter storms and extreme cold cut into hiring, and a potential sign that US labor markets may be gaining momentum.
  • The US economy grew very slowly in the first quarter of 2014. GDP growth estimates showed that the economy increased at an annual rate of 0.1%. This growth rate was relative to rate in the fourth quarter of 2013 of 2.6%. Economists were anticipating growth around 1.1%.
 
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