Economic data remained mixed, but some of the winter effects of the past few months appear to be dissipating.  An important test in coming weeks/months will be how the much more extreme-than-average winter normalizes and if economic data can similarly regain better traction.

Although tensions seem to have cooled to a simmer in recent weeks, investors are continuing to monitor the Ukraine/Russia situation closely, as an unexpected development here is sure to rattle markets.  In the meantime, upcoming corporate earnings may provide enough excitement for the time being.

U.S. stocks were mixed during the week, with large-cap outperforming smaller-caps by the widest margin in some time.  From a sector perspective, energy and utilities stocks gained a few percent while consumer discretionary, financials and materials lagged over a percent.  In particular, more speculative names in biotech and social media have experienced difficult weeks as of late.  Facebook announced a $2 billion acquisition of a virtual-reality goggle manufacturer, which caused some investors to scratch their heads due to the lack of a proven product.  Along the same lines, the Russell 2000 is currently trading at one of the larger valuation premiums over the S&P in many years (approaching 25%), which reaffirms our underweight to the asset.

In developed markets, Japanese stocks gained +4%, followed by Europe and the U.K. with smaller positives (still outgaining U.S. stocks).  Emerging market stocks were the best performing assets of the week, with a recovery in Turkey, Brazil, South Africa and India—the problem children of recent months.  Most recently there does seem to be a bit of a shift in flows away from more speculative U.S. issues into better-valued foreign equities, such as emerging markets, although such flows can be finicky and fast-changing.

Bonds experienced a moderately positive week, with long governments and investment-grade corporate credit leading the way, and high yield bonds just behind.  Emerging market bonds performed even better than that, while developed market debt performed in line with U.S. bonds.

Real estate was led by a recovery in Asian REITs, up nearly 3%, with European REITs just behind and U.S. REIT categories roughly flat on the week.  Mortgage REITs were the worst-performing segment, losing over a percent.

Commodities were generally higher on the week, led by continued gains in coffee and sugar (the former up over 50% YTD already), as well as natural gas, copper and crude oil… so seemed the majority of the closely-watched contracts gained, with the exception of gold, which lost -3% as risk-off sentiment eased.