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Market Commentary: First Quarter 2015
Stocks in the United States posted low single-digit returns in the first quarter as markets began to absorb the end of quantitative easing (QE) and the prospect of rising rates. International equities were boosted as the European Central Bank embarked upon their own version of QE, but returns were stymied by continued weakness in the euro vs. the U.S. dollar. Core domestic fixed income posted modest gains. Although attractive return opportunities in fixed income are not as numerous as they had been in recent years, small pockets of potential remain.
Economics and Shame in the Land of the Rising Sun
Economically, Japan has shown some signs of improvement, but challenges remain. Structural reforms are longer-term initiatives that could prove very important to achieving Japan’s growth and inflation objectives.
2015 Credit Market Outlook: Steamroller Blues
James Taylor probably never intended to write songs about the credit markets. Nevertheless, Steamroller Blues, which he wrote back in 1970 (well before the public high yield bond and bank loan markets existed), unintentionally paints a portrait of credit strategies such as high yield bonds, bank loans, and most credit hedge funds. These strategies tend to be long-biased, and suffer from return patterns with fat tails and negative skew.
Market Commentary: Fourth Quarter
The U.S. dollar strengthened in the fourth quarter of 2014—as well as for the year—placing downward pressure on U.S. investors’ international holdings. This combined with the price of oil collapsing and the relative strength of the U.S. stock market has prompted some investors to question whether the widely held belief that portfolios should be broadly diversified in order to maximize the probability of achieving long-term performance goals should still be applied.