Commentaries
PMC Market Commentary: April 4, 2014
A Macro View – March Monthly Recap
Domestic equity markets posted mixed results in March, with certain indices extending February’s gains, while others wavered. Geopolitical tensions were a key factor impacting performance, with Russia’s annexation of Crimea and the Russian army’s subsequent massing along the Ukraine border causing concern throughout Europe and Washington. Economic data remained rather sluggish, with the extraordinarily severe winter weather causing short-term distortions that extended into March.
International equity markets also generated varied results in March. The MSCI World ex-U.S. Index declined -0.4% for the month. After a long stretch of underperformance, emerging markets finally found solid ground, and performed quite well relative to developed markets. Investors believed the adverse effects of the Federal Reserve’s tapering had been fully discounted, using low perceived valuations as a buying opportunity. The MSCI Emerging Markets Index gained +3.1% for the month. In contrast, the MSCI EAFE Index, which measures developed markets performance, dropped -0.6% for the month, with a primary reason being the aforementioned Russia-Ukraine tensions. Regionally, Latin America and Pacific ex-Japan were the best performers on a relative basis, with the MSCI EM Latin America Index and the MSCI Pacific ex-Japan Index gaining +8.8% and +2.4%, respectively. Eastern Europe and China were among the poorest performers, with results of -2.1% and -1.7%, respectively.
Fixed-income markets generally trailed off in March, as investors digested mixed economic data and statements from Janet Yellen, the Fed chairman. The Fed continued its tapering of its asset purchase program during the month, reducing purchases by an additional $10 billion. As stated above, economic data during the month was mixed, and investors strived to determine just how much weather was to blame. In this environment, the benchmark 10-year U.S. Treasury yield ended the month at 2.72%, up slightly from the 2.66% the level of February 28th. Broad-based fixed-income indices posted slightly negative results in March, with the Barclays U.S. Aggregate Bond Index easing -0.2% for the month. Global fixed-income markets were essentially unchanged, with the Barclays Global Aggregate ex-U.S. Index inching down -0.01% for the month. Intermediate-term corporate bonds were soft, as the Barclays U.S. Corporate 5-10 Year Index fell -0.1%. The Barclays U.S. Corporate High Yield Index posted a gain of +0.2% for the month. Municipals also performed relatively well, advancing +0.2%.
The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this weekly review is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. An investor may experience loss of principal. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment strategy. Past performance is not indicative of future results.
Information obtained from third party sources are believed to be reliable but not guaranteed. Envestnet|PMC™ makes no representation regarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.
Investments in smaller companies carry greater risk than is customarily associated with larger companies for various reasons such as volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. Investing overseas involves special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. Income (bond) securities are subject to interest rate risk, which is the risk that debt securities in a portfolio will decline in value because of increases in market interest rates. Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing in ETFs may bear indirect fees and expenses charged by ETFs in addition to its direct fees and expenses, as well as indirectly bearing the principal risks of those ETFs. ETFs may trade at a discount to their net asset value and are subject to the market fluctuations of their underlying investments. Investing in commodities can be volatile and can suffer from periods of prolonged decline in value and may not be suitable for all investors. Index Performance is presented for illustrative purposes only and does not represent the performance of any specific investment product or portfolio. An investment cannot be made directly into an index.
Alternative Investments may have complex terms and features that are not easily understood and are not suitable for all investors. You should conduct your own due diligence to ensure you understand the features of the product before investing. Alternative investment strategies may employ a variety of hedging techniques and non-traditional instruments such as inverse and leveraged products. Certain hedging techniques include matched combinations that neutralize or offset individual risks such as merger arbitrage, long/short equity, convertible bond arbitrage and fixed-income arbitrage. Leveraged products are those that employ financial derivatives and debt to try to achieve a multiple (for example two or three times) of the return or inverse return of a stated index or benchmark over the course of a single day. Inverse products utilize short selling, derivatives trading, and other leveraged investment techniques, such as futures trading to achieve their objectives, mainly to track the inverse of their benchmarks. As with all investments, there is no assurance that any investment strategies will achieve their objectives or protect against losses.
Neither Envestnet, Envestnet|PMC™ nor its representatives render tax, accounting or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Taxpayers should always seek advice based on their own particular circumstances from an independent tax advisor.
© 2014 Envestnet. All rights reserved.