Economic Update 2-23-2015

• Economic data on the week was mixed to lower, with several key surveys and housing reports coming in weaker than expected. Perhaps more severe winter weather in recent weeks played a bit of a role, and/or we’re seeing some flattening in growth acceleration.

• U.S. stocks experienced a less volatile week, with prices ending up slightly above where they started after news of a potential deal between Greece and Europe at the end of the week. Interest rates rose, which was a negative for government bonds across the curve, but credit fared better.  Commodities lost ground again with choppiness in the oil patch.

On a holiday-shortened week, U.S. stocks were generally flat for a good portion until Friday, when news of a possible four-month loan extension for Greece from the Eurozone boosted spirits and lifted prices a bit (although Greece wanted 6 months, and also was required to commit to a few other measures, such as the completion of the current bailout review and not rolling back reform measures that could impact its finances/economy, as well as pledged to honor all existing debt obligations).  From a sector perspective, health care and industrials gained over a percent, while energy underperformed.

Foreign stocks were helped by the Greece news, notably the European periphery of Portugal and Italy, as would be expected.  Japanese stocks also gained upon release of final Q4-2014 GDP figures that showed a growth rate of +2.2%.

Bonds lost ground again on the week as rates ticked up in the middle and longer end of the yield curve by up to 10 basis points.  Credit, including high yield and floating rate, gained strongly on the week, while long government bonds were the biggest laggards.  In foreign markets, European debt sold off presumably in accordance to the deal with Greece, which pushed sentiment towards risk assets, as did a PMI reading that showed activity in the Eurozone is picking up.

Real estate in the U.S. was generally negative by around a half-percent, with higher interest rates and mixed economic data.  Japanese REITs bucked the trend by moving higher, along with other Japanese equities.

Despite early promise, commodities turned negative on the week on the order of a few percent, in keeping with energy prices.  Natural gas prices rose several percentage points, with continued frigid temperatures, while crude oil was one of the worst performers—trading in the low $50’s most of the week, before setting just above $50.

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, 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.