US Economy: Stable, less robust.
Weaker Feb. data for personal income (-0.1%) and consumer spending (-0.5%) suggest that while US GDP growth is likely to continue, it will slow substantially 1st quarter 2019. Manufacturing expectations (54.2 on PMI Index) hit the lowest level since 2016, although still expansionary.
US Stocks: Small stocks lead.
US equities continued to gain in Feb. with small caps leading all asset classes as investors became less concerned about recession and US-China trade talks progressed. Corporate earnings to-date have supported equities with most companies beating estimates, but earnings growth forecasts for 2019 have fallen.
Foreign Stocks: EM stocks falter.
Despite strong capital flows into the emerging markets (EM), ongoing uncertainty about a resolution to the US-China trade war left emerging market equities lagging their developed peers. South Africa (-5.3%) notably underperformed on meager growth and rising deficit forecasts.
Fixed Income: Demand lifts munis.
Municipal bonds continued to benefit from strong demand from an aging population and limited new issuance by state and local governments. In the near term, the pricing of shorter-maturity munis could lag as investors reduce positions to cover tax bills.
Real Assets: Rally rolls on.
Diversified portfolio positioning in commodities (+1.0%) and infrastructure equities (+2.3%) was helpful to portfolios as oil prices continued to rise amid OPEC production cuts, and utility shares gained in Feb. (+3.5%) on steady US interest rates.
Alternatives: Modestly positive.
Unsurprisingly, hedge fund strategies long on equities continued to be among the strongest performers (+1.3%); however, fundamental value hedge strategies (+2.1%) also performed well in contrast to traditional value stocks.
Equities Total Return
|U.S. Large Cap||3.2%||11.5%||4.7%|
|U.S. Small Cap||5.2%||17.0%||5.5%|
Fixed Income Total Return
|U.S. Agg. Bond||(0.1%)||1.0%||3.2%|
|U.S. High Yield||1.7%||6.4%||4.3%|
|Munis Broad Mkt||0.6%||1.3%||3.9%|
Non-Traditional Assets Total Return
|Overall HF Market||0.6%||2.8%||(4.1%)|
|Gold Spot $/OZ||$1313||$1201||$1318|
|U.S. Dollar Index||91.4||90.3||86.5|