February market review

March 12, 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 February —


  • Global financial markets posted gains for February, despite increasing geopolitical tensions arising from unrest in the Ukraine. In the Developed Markets, these gains reversed January losses.
  • For the US, the S&P 500 returned 4.57% for February and 0.96% Y-T-D. The Dow Jones Industrials Average Index was the worst performing US equity index in February, up 3.97% and still down -1.54% Y-T-D. The Russell 2000 small cap index was up 4.71%, outperforming the S&P 500, and is up 1.81% Y-T-D.
  • The Developed International equity index, MSCI EAFE, outperformed the S&P 500 in February, up 5.56% for the month and up 1.31% Y-T-D.
  • Emerging markets (MSCI EM) was up 3.31% in February but still down -3.40% Y-T-D.
  • The Japanese Nikkei 225 was down -0.49% in February and -8.90% Y-T-D. This underperformance was accompanied by a rise in the Yen.
  • Government bond yields held constant across the curve in February. In February, the 10-year Treasury yield was flat at 2.65% and the 30-year Treasury yield was down 2bps to 3.58%. The Federal Reserve again left the overnight lending rate unchanged at 0-0.25%.
  • Corporate bond prices were up in February. The Barclays Aggregate Index was up 0.53% for the month and 2.02% Y-T-D. The Credit Suisse Leveraged Loans Index (bank loans) was up 0.22% for February and 0.93% Y-T-D.

Economic & Geopolitical Headlines

  • The biggest story in February from an economic and societal standpoint was the continuation of the abnormally cold and snowy winter. Economists are arguing whether the weather related slowdowns are hiding underlying weakness, are just a blip, or are masking what otherwise would be even more robust growth.
  • The ISM manufacturing index indicated an increase in expansion in February; US PMI was at 53.2 in February, up from 51.3 in January. Global PMI numbers show that manufacturing continues to strengthen throughout the world. A reading above 50 is considered economic expansion.
  • Janet Yellen has taken over as Chair of the Federal Reserve. She and the Fed have continued the process of “tapering”. Tapering is the gradual reduction of the amount of assets the Fed is purchasing each month under its quantitative easing program.
  • Job creation was better than expected in February, with the economy adding 175,000 new jobs, an improvement over January and ahead of the 149,000 expected by economists. The unemployment rate, however, increased 0.1% and is now at 6.7%. The labor force participation held constant at 63%, just above the five-year low.
  • Domestic growth, as measured by estimated GDP, showed that the economy grew at an annual rate of 2.4% for the fourth quarter of 2013, revised down from the advanced estimate of 3.2%. Most economists were pleased with this figure, especially considering the headwind of the Federal Government shutdown at the beginning of the quarter.
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