• It was a slow week for economic news, but a few pieces came out positively.  Janet Yellen’s congressional testimony was also benign and dovish—alluding to at least another year of easy monetary conditions.
• Equity markets were generally flattish on the week, although a trend of large-cap outperforming small-cap names has continued, in line with valuation differences between the two.

Stocks experienced a generally uneventful week, with the S&P ending just slightly lower and the Dow reaching a new all-time high, with no major economic releases or high-profile earnings reports to excite or depress investors.  From a sector standpoint, consumer staples and materials were strongest, while technology and consumer discretionary lagged.  The biggest news seemed to be Apple in the market to buy a company that makes headphones.  Small caps lost ground relative to large caps, continuing the trend of higher momentum and higher-valued issues falling off.  Perhaps the overvaluation that we and many others (including some small-cap PMs we speak with and even Yellen during her Q&A last week) recognize the lessened opportunities there.  From a sentiment standpoint, Lipper noted that last week was the 18th straight positive week for U.S. equities in terms of cash inflows ($1.6 billion for the week).

In foreign markets, the U.K. was up slightly, while Europe and Japan fell by a few basis points.  Emerging market fared better, led by Russia, India and Turkey, while China dropped a few percent again, in line with estimates of private manufacturing activity there in April falling below 50 for the fourth month in a row.  Political tension in Thailand also affected values in that part of the world.

Bonds were mixed, with Treasury rates sharply higher on the long-end, and lower in the 3-7 year belly of the curve, so most long bond indexes lost a percent or so on the week while other maturities weren’t as affected.  The 10-year Treasury hit its lowest point in six months with continued Ukrainian stresses early in the week, lukewarm economic data and Yellen’s easing bias comments, but began to reverse later in the week.  Rates remain low on a ‘real’ basis (considering year-over-year inflation levels of 1.5% and a Fed target of 2%) compared to history and this pressure continues.

Foreign bonds performed better than U.S. debt on the week, despite a stronger dollar.  The ECB met this week, and the decision was no action.  However, in the midst of very low growth and inflation pressures so low they border on deflation, Draghi suggested that policy may involve some easing in the next and forthcoming meetings and that caused sovereign rates to drop.  Emerging market bonds rallied bit on eased Eastern European concerns and a few country upgrades.

Real estate was generally positive, led by European names and U.S. residential and retail.  Asian REITs were negative, along with U.S. mortgage REITs as long interest rates moved higher.

Commodity markets were about a percent lower on the week.  Nickel was the large gainer, almost up 10% the Indonesian government’s refusal to repeal an export limit of the unrefined metal—spooking global markets (the metal is up 15% in April, and over 40% year-to-date).   Then again, it’s only 2% of the DJ-UBS index and less of the GSCI, so these idiosyncratic moves have more newsworthy impact than they do financial (at least in a direct sense).  Wheat was also up a bit, as was crude oil slightly.  Natural gas and coffee corrected by sizable amounts.  However, the DJ-UBS remains up 8% year-to-date, making this one of the best places to be in 2014 so far.

 Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Freddie Mac, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

 The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.