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.
- After raising short-term interest rates in December, the Federal Reserve revealed in its meeting minutes that they remain concerned that inflation could remain sub-2% for longer than expected, which could impact the timing and amount of future rate hikes
- The European Central Bank (ECB) and Bank of Japan (BOJ) continue to pursue diverging monetary policy from the Federal Reserve, as the two central banks reaffirmed their low-rate policy to address low inflation and stagnant economic activity
- WTI crude oil briefly traded below $30/bbl mid-month as weakening manufacturing data in the U.S. and China and increased exports from Iran further exasperated the global supply/demand imbalance