Market Currents

• Back into the Green. After a rocky start to the year, the markets staged an impressive rebound in the final few weeks of the quarter.  From a negative return in excess of 11% in mid-February, global equities rallied in near-uninterrupted fashion to finish slightly in positive territory.

• Central Banks to the Rescue…Again. Central banks scaled back negative interest rate policy (NIRP) efforts after the market’s Bronx cheer at the Bank of Japan.  The ECB aggressively expanded its accommodation program, and dovish statements from the Federal Reserve ratcheted down future rate hike expectations in the US.

• Dollar Weakening. The strength in the U.S. dollar, which has proved to be a major headwind for multi-national corporations over the past two years, finally appears to be topping out.  A lower greenback has the effect of boosting export competitiveness and improving currency translation adjustments for many larger companies.

• Oil Markets Firming. Thanks to the weakening dollar, OPEC production freeze rhetoric, and US shale cutbacks, crude oil has been climbing higher, which should help stabilize outlooks for energy-related companies.

• China Stabilizing. Although doubts among market observers persist, China is muting concerns over its currency and growth outlook this year by reassuring the world it will not adopt excessive currency devaluation steps, and has the monetary tools to stave off a “hard landing” in their economy.

• A Resilient US. The US economy continues as relative bright spot.  Approximately 70% of US GDP is driven by consumption.  Jobs growth continues to track positively.  Average wage growth, after remaining stagnant for over a decade, is finally picking up.  Household balance sheets are comparatively healthy.

• Equities Remain Attractive. We are encouraged to observe that the recent rally is supported by a healthy market breadth as well as strength in “economically sensitive” sectors, indicative of an improving risk appetite.  Central banks continue to be very accommodative.  The twin headwinds of last year, a strong US dollar and collapsing crude prices, appear to be fading.  Despite these positives, investor sentiment remains cautious—which, in contrarian terms, is bullish.