• It was a busy week for economic data, with several key releases including 1^st Quarter GDP—which disappointed.  The Friday release of job growth, however, was strong.
• The Russia/Ukraine situation continues to simmer, but not yet boiling over, despite regional incidents and increasing sanctions against targeted Russian interests.

U.S. stocks experienced another up week with M&A activity picking up and decent economic news.  From an earnings standpoint, three-quarters of firms in the S&P have reported, and three-quarters of those topped estimates (of course, on lowered expectations), with growth of 4% over a year ago.  From a sector standpoint, telecom and technology stocks outperformed, while utilities and energy lagged.  Small caps again showed weakness versus the larger-cap group.

In foreign markets, U.K. gained 2.5%, outperforming Europe and Japan—all outperforming the U.S. on the week.  Mario Draghi of the ECB had apparently mentioned in a meeting that quantitative easing could be a policy option, but was unlikely—offering a mixed message.  Interestingly, EU consumer confidence has now reached its highest point since 2007, although it remains negative in the majority of countries (U.K. and Germany being the exceptions among the larger nations).  The problem children of the emerging markets, such as Russia and Turkey, were interestingly the best performing stocks on the week.  China was one of the few losing regions on the week.

Bonds had a good week, with rates falling following a weak GDP report and Ukrainian concerns.  Long-term bonds experienced the best returns, in both treasuries and corporates.  Emerging market bonds also performed well, outperforming developed market issues, especially those of Japan. 

Real estate returns were led by strong showings in Asia and U.S. residential, while European and U.S. mortgage REITs lagged.  Year-to-date, however, the 15% return for the Wilshire REIT index remains the best of any asset class.  By the way, as an operational note, the ING fund family (being no longer part of ING Bank) has changed their name to ‘Voya.’

Commodities were generally down on the week, despite the help of a weaker dollar.  Wheat rose several percent on supply issues caused by drought conditions.  Oil prices fell a percent to just under $100/barrel, as did industrial metals with a drop in aluminum—both due to overcapacity issues.  We had an interesting chat with a commodities portfolio manager last week, who affirmed that quite a number of futures contracts have indeed moved from the ‘contango’ condition from several years ago (implying less upside) to a more normal ‘backwardated’ situation—implying potential for added return as contracts ‘roll’ from one month to another.  This is in no small measure due to the poor sentiment surrounding the commodity complex in recent years (a reversal of the exuberance of the late 2000s), and is somewhat positive from a contrarian standpoint.