In February, we continued to watch the major central banks maintain very accommodative monetary policies. The Bank of Japan voted mid-month in favor of continuing with near-zero interest rates and asset-purchases at an ¥80 trillion annual pace. The Bank of England’s Monetary Policy Committee’s voted unanimously to maintain a low benchmark interest rate, whereas recent votes were split and, in the Eurozone, finance ministers reached a temporary resolution on a Greek aid program by granting Greece a four-month extension.

The latest U.S. Federal Open Market Committee meeting minutes and Congressional testimony by Federal Reserve Chair Janet Yellen both noted concerns that raising interest rates prematurely could adversely impact economic recovery. It is expected that the Fed will likely delay raising short- term interest rates (possibly until September) due to their focus on a number of key issues, including: below-target inflation, subpar employment and weak wage growth.

U.S. average hourly wage income increased, but an increase in jobless claims resulted in an unemployment rate that inched back to 5.7%. Consumer sentiment remained high but somewhat below recent record levels, which resulted in lower retail sales mostly from weakness in automobiles and gasoline, as consumer and producer prices fell (the latter underwent the largest one-month drop since the series was introduced in 2009).

U.S. industrial production returned to growth in January, as orders for durable goods jumped (both with and without the volatile transportation sector). New home sales remained strong in January, while existing home sales disappointed. Economic growth, as measured by GDP, slowed to a 2.2% annual rate during the fourth quarter, which was slower than initial estimates and significantly less than the third quarter 5.0% rate.

In the U.K., services and construction sectors grew notably during January and the unemployment rate declined slightly to 5.7%. Retail sales fell in January, as prices retreated at both the producer and consumer levels. Slowing economic growth during the fourth quarter (at a 0.5% pace) was in line with preliminary estimates, keeping the annualized growth rate unchanged at 2.7%, which was the highest rate since 2007.

In the Eurozone, gains were reflected in rising economic sentiment and consumer confidence, with the latter improving for the third consecutive month. Overall consumer prices continued to slide in January to the lowest rate since 2009, although core prices (which excludes energy, food, alcohol and tobacco), moved higher from a year earlier. Fourth-quarter economic growth moved higher (to 0.3%), modestly exceeding the third-quarter pace and contributing to 0.9% annualized growth. Most member states reported gains, although there remained a wide gap between the strongest and weakest members.

Market Impact

Fixed-income market performance was generally negative during February, with only the riskier areas of U.S. high-yield debt and U.S. dollar-hedged emerging-market debt delivering positive performance. U.S. Treasury securities delivered the worst performance, followed by global sovereign debt, U.S. investment-grade corporate debt and Treasury Inflation-Protected Securities.

Global equity markets, as reflected by the MSCI AC World Index, advanced in February. Russia rebounded strongly, leading all other countries (in U.S. dollar terms), followed by Greece. In fact, seven of the top ten best-performing countries globally were in Europe. Larger economies, including the U.S., Japan, and Germany performed slightly better than the World Index, China returned considerably less than the index. Asia and the Middle East were most heavily represented among the small group of countries, with negative returns for February.

By industry sector, global materials led performance in February, followed by consumer discretionary and information technology. Financials, industrials and energy performed slightly better than the World Index, while healthcare, telecommunications and consumer staples lagged (although still positive). For February, utilities represented the only negative performance on a sector basis.


This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice.

There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments.  Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. 

Diversification may not protect against market risk. There is no assurance the objectives discussed will be met. Past performance does not guarantee future results. Index returns are for illustrative purposes only and do not represent actual portfolio performance. Index returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index.This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice.