Current Thinking

1st Quarter 2015 Economic & Market Review

Economy
The U.S. continued to travel down the road of modest recovery buoyed by a current domestic unemployment rate of 5.5% (through March) down from 6.7% a year ago. Federal Reserve (“Fed”) Chair Janet Yellen stated the chief driver of future changes to the Federal Funds Rate will be based on inflation measures. Outside of the U.S., the European Central Bank announced that its quantitative easing methodology would entail monthly asset purchases of roughly $70 billion through the third quarter of 2016. Globally, India is supplying attractive growth rates in a role formerly filled by China.

Equity Markets
Global equity markets produced gains for the first quarter of 2015 (“Q1”). The S&P 500 Index, primarily representative of domestic large-cap stocks, rose 1.0% in Q1 compared to 5.0% for the MSCI EAFE Index (representing large-cap international stocks). Overall, midcaps (+4.0%) and small-caps (+4.3%) were the strongest performers domestically. From an investment style perspective, growth outpaced value across the U.S. market capitalization spectrum. Emerging markets (MSCI EM Index – net) rose 2.2% in Q1, reversing the trend of recent declines.

Fixed-Income Markets
Longer duration bonds had the most success in Q1as interest rates declined. The Barclays Capital (“BarCap”) Long Government/Credit Index (+3.4%) outpaced both the BarCap U.S. Aggregate Bond Index (+1.6%) and the BarCap Intermediate U.S. High Yield Index (+ 2.4%). Cash continued to produce a yield near 0.0%.