A Macro View: March Monthly Recap
Domestic equity markets were modestly higher in March, extending their 2017 winning streak. Volatility increased somewhat earlier in the month, as the Republican-led Congress withdrew legislation designed to repeal and replace the Affordable Care Act, better known as Obamacare. Despite the minor consolidation, the S&P 500 has gained about 6.1% so far this year. Equity investors also assimilated the FOMC’s decision to raise short-term interest rates at its March meeting. Analysts expect that there will be two more rate increases in 2017. The employment situation took a breather in March, as employers added 98,000 jobs, below both the consensus expectation of 180,000 and the prior month’s gains of 235,000. Economists cite severe storms around the country as one factor adversely affecting job growth.
Against this backdrop, broad market indices were, on balance, modestly higher during the month. The S&P 500 gained +0.1%, and is now up +17% over the past twelve months. The Dow Jones Industrials (DJIA) gave up some ground, declining -0.6%. The tech-heavy Nasdaq Composite Index rose by +1.6%. The Russell 2000 Index of small cap stocks performed in line with the Russell 1000 Index of large cap stocks. Growth stocks outperformed value stocks. In terms of sector performance, the top performers in the month were Information Technology, Consumer Discretionary, and Utilities, with returns of +2.6%, +2.1%, and -0.20%, respectively. Financials, Telecommunications Services, and Energy were the poorest performers, with returns of -2.8%, -1.2%, and -1.0%, respectively. Commodities slumped, posting a loss of -2.8%. Real Estate Investment Trusts (REITs) also experienced difficulty, declining -2.8%.
International equity markets, on average, delivered superior returns relative to domestic markets in March, continuing a turnaround. With the exception of Japan, gains were experienced in most regions, and within both developed and emerging markets. The MSCI World ex-U.S. Index advanced by +2.5% for the month. Emerging markets also gained ground, with the MSCI Emerging Markets Index posting a return of +2.5% for the month, and is now up +17.2% for the past twelve months. The MSCI EAFE Index, which measures developed markets performance, gained +2.8%. Regionally, Europe and Asia were the best relative performers, with returns of +4.0% and +3.3%, respectively. Japan and Latin America were the poorest relative performers, with total returns of -0.4% and +0.6%, respectively.
Fixed income markets were mixed in March, as investors digested the FOMC’s decision to hike rates in March. In addition, the FOMC minutes revealed that the committee discussed its expectation that it would begin to unwind the Fed’s balance sheet later this year. The yield curve moved in parallel fashion during the month. Within this context, the yield on the 10-year U.S. Treasury note ended the month at 2.40%, four basis points higher than the level on February 28. Performance of broad-based fixed income indices was varied in March, with the Barclays U.S. Aggregate Bond Index declining -0.1%. Global fixed income markets performed well, with the Barclays Global Aggregate ex-U.S. Index gaining +0.3%. Intermediate-term corporate bonds were slightly lower, as the Barclays U.S. Corporate 5-10 Year Index eased by -0.1%. The Barclays U.S. Corporate High Yield Index dropped -0.2%. Municipals advanced by +0.2% in March.
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