Key Points
• Investors were taken on a wild ride through the first quarter. However, the second quarter is starting within shouting distance of the year’s starting mark. We believe the trend is generally higher, but bouts of volatility are likely to persist.
• Potential Federal Reserve action will likely stay at the forefront of investors’ minds, with some conflicting messages coming after its recent meeting adding to the consternation. This being a Presidential election year could make things a bit more interesting as we march toward November.
• Emerging markets have surged ahead, aided by a weaker U.S. dollar. Action has been encouraging but future gains likely hinge on improving global growth.
A lot of movement, little progress
It was a quarter for the history books, but if one were to just look at the starting and ending point for equities you’d wonder what the fuss was about. We saw ramped up fears of both a global and domestic recession push stocks substantially lower and into correction territory. But on February 11, a rally ensued that brought equities back to within shouting distance of the flat line for the year. Recession fears faded with better data, and sentiment was aided by a dovish Federal Reserve meeting that saw forecasts for rate hikes this year move to two from four. Commodities also staged a nice turnaround, aided by a flattish to slightly weaker U.S. dollar, while oil and stocks continue to trade in pretty tight lockstep.