US Economy: GDP gets a lift.
Q1 US GDP growth surprised to the upside (+3.2%), but the underlying data was less rosy. Growth was driven by net exports (+1.0%), inventory restocking (+0.7%) and a spike in state and local government spending (+0.4%), all of which are likely to prove transitory.
US Stocks: Another good month.
April was another strong month for US equities, with more than 75% of S&P 500 companies reporting Q1 profits beating analyst estimates so far. Market returns were driven by the technology and financial sectors, up 6.4% and 9.0% in April, respectively.
Foreign Stocks: Disappointing data.
With the US dollar stable, currency wasn’t a significant detractor for foreign stocks. However, while European equities gained overall, Asian stocks lagged on concerns about slowing growth in China and a weaker outlook for microchip producers, which are a large component of Asian stock indexes.
Fixed Income: Risk-on is back.
A slight rise in US interest rates hindered high-quality fixed income but not lower-quality, high-yield bonds. Year-to-date, higher-yielding sectors — including bank loans and emerging market debt denominated in US dollars — have benefitted as investors focused on income and less on risk.
Real Assets: Infrastructure leads.
Infrastructure equities posted the strongest returns within real assets in April, while REITs took a step backward, as we had anticipated, due to vulnerability to slightly higher interest rates. As a subset of equities, infrastructure has compelling characteristics from both a risk and return perspective.
Alternatives: Hedge funds lag.
Managed futures posted another strong month capitalizing on persistent trends, while hedge fund strategies posted modest returns. In aggregate, hedge funds haven’t kept up with stock and bond market returns, even though managers long on equities have found relative success in a rising market.
Equities Total Return
|U.S. Large Cap||4.0%||18.2%||13.5%|
|U.S. Small Cap||3.4%||18.5%||4.6%|
Fixed Income Total Return
|U.S. Agg. Bond||0.0%||3.0%||5.3%|
|U.S. High Yield||1.4%||9.1%||6.7%|
|Munis Broad Mkt||0.4%||3.4%||6.1%|
Non-Traditional Assets Total Return
|Overall HF Market||0.7%||3.3%||(2.8%)|
|Gold Spot $/OZ||$1284||$1215||$1315|
|U.S. Dollar Index||92.8||90.8||86.4|