Market Commentary

Questions about the health of the global economy continued to weigh on markets during the quarter. Oil prices retrenched further while the Bank of Japan surprised investors by lowering short-term interest rates below zero. With this as backdrop, equities continued their global sell-off, with U.S. large caps returning -5.0% and international returning -7.2%. The tech-dominated Nasdaq, dominated by growth stocks, returned -7.9% and domestic small caps returned -8.8%. Bonds functioned as a safe haven during the month, with intermediate core bonds returning 1.4% and municipals 1.2%. Investors effectively drove down yields on 2yr and 10yr Treasuries to levels not seen since April 2015.

Several years of below average market volatility has been replaced by volatility levels last experienced in 2012. Items forefront in the financial media today as causes of the heightened volatility include China, the commodity price crash, higher US interest rates and widening credit spreads. These concerns are anecdotal to the broader overriding issue which is the risk of slowing global growth and the related difficulties. Attached is a quick update on several of these factors.

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