March Market Review

April 19, 2016

Shortly after the end of each month, our Chief Investment Strategist David Klassen provides a review of the market and our funds’ performance. Following is a summary of March —

• Global financial markets posted strong gains in March as investor risk tolerance returned.
• US equities were up. The S&P 500, which tracks large cap stocks, was up 6.78%, and is up 1.35% for the quarter and Y-T-D. The Russell 2000 Index, which tracks domestic small cap stocks, increased 7.98% and is down 1.52% for Q1 and Y-T-D. The international developed equity index (MSCI EAFE) was up 6.51% in March and is down 3.01% for the first quarter and Y-T-D. The emerging markets index (MSCI EM), the best performing index for the month, was up 13.23% for March and is up 5.71% for the first quarter and Y-T-D.
• The Japanese Index (Nikkei 225) ended March up 4.57% and is down 11.95% for Q1 and Y-T-D.
• In February, bond yields were mixed. The 30-year bond yield decreased 1bp to 2.61%, the 10-year increased 3bps to 1.73%, and the 5-year was unchanged at 1.21%. Bond yields move opposite prices, so treasury prices were generally flat over the month. The Federal Reserve left the overnight lending rate unchanged.
• Corporate bond prices increased in March, with the Barclays Aggregate Index up 0.92% for March and up 3.03% for Q1 and Y-T-D. The Credit Suisse Leveraged Loans Index (bank loans) was also up 2.64% for March and is up 1.33% for Q1 and Y-T-D.
• The U.S. economy, measured by real gross domestic product (GDP), in the fourth quarter 2015, was revised up from 1.0% to 1.4%, according to “third” estimates released by the Bureau of Economic Analysis. This rate trails the second and third quarter GDP growth rates of 3.9% and 2.0%, respectively. Overall real GDP growth for 2015 is estimated at 2.4%.
• The Federal Reserve met in March. Short term interest rates were left unchanged, and Federal Reserve Chair Janet Yellen commented that Federal Open Market Committee (FOMC) will be cautious regarding future interest rate increases.
• Economic activity during the month of March in the manufacturing sector showed that the economy expanded for the first time in the last six months. The March PMI registered 51.8, an increase of 2.3 percentage points from the February reading of 49.5, according to the Institute for Supply Management. A reading above 50 is considered economic expansion and below 50 is considered contraction.
• The U.S. labor market grew in March as employers added 215,000 jobs, again exceeding market expectations of 200,000 jobs per month. The unemployment rate ticked up slightly to 5.0 percent in March. January and February employment numbers were revised by a combined 1,000 jobs less than previously reported.

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