United States

Economic uncertainties and rate discussions

May 2016 market commentary


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Domestic equity indices finished the month higher, while international markets posted lower returns. Heightened volatility in currency markets was a headwind to performance for dollar sensitive asset classes including commodities, unhedged foreign bonds and local currency denominated emerging markets debt. Domestic fixed income indices were muted due to conflicting readings from economic indicators, ongoing concerns surrounding global growth prospects, and ambiguity surrounding the Federal Reserve’s potential response to various data points.

For the month, the S&P 500 Index gained 1.8 percent, while the Russell 2000 Index of smaller companies increased 2.3 percent. The financials, healthcare, information technology and utilities sectors were the top performers, while the energy and materials sectors were weaker. Across market capitalizations, small-cap securities outperformed their large- and mid-cap counterparts. Across styles, growth outperformed value across large- and small-cap securities.

U.S. fixed income markets were generally positive. Long-maturity treasuries outperformed shorter-dated issues as the yield curve flattened. Investment-grade corporate securities were mixed as utility- and financial-related credits outperformed industrial-related issuers. Lower quality, higher yielding corporate securities experienced gains as well. Other sectors, including mortgage-backed securities (MBS) and asset-backed securities (ABS) ended higher, while municipal bonds declined.

International markets were negative as the MSCI EAFE fell 0.8 percent. Among the largest European markets, France gained 0.3 percent, while Germany posted a 0.6 percent loss. Meanwhile, Italy and Spain lost 3.5 percent and 2.4 percent, respectively. Within the Pacific region, Japan disappointed and fell 1.0 percent, while Australia slipped 2.4 percent. In the emerging markets, the MSCI EM Index ended 3.7 percent lower amid poor performances from select Emerging Asian, Latin American and EMEA (Eastern Europe, Middle East and Africa) Index countries.

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