After a challenging start to the year the market found its stride in mid-February turning negative performance into a much needed rebound. March’s price momentum carried into April as volatility declined and central banks lined up to lend their monetary support to their respective markets. In addition to accommodative central bank policies, markets were boosted by a weaker dollar, recovering oil prices and economic stabilization in China. Price gains were not limited to U.S. stocks, rather it was wide spread encompassing multiple asset classes and geographic regions.

The three major U.S. stock indices found themselves underwater by 10-15 percent early in the year and now two indices have turned positive on a year-to-date basis. International developed countries and emerging markets followed the U.S. markets lower at the start of the year. They also bounced decisively off their lows, with the emerging markets leading the charge. MSCI Emerging markets are now up 6.29 percent on a year-to-date basis.

U.S. stock valuations, as measured by price-earnings ratios, are running slightly above their long-term average of 15.8 times. International stock valuations are trading below their long-term averages and may offer future value opportunities. The recent rally is a result of the market looking ahead to an expected earnings recovery in the third and fourth quarters. While stocks are not cheap anymore, their future expected earnings justify current prices.

Bonds often do not move in the same direction as stocks, but in this time period, the realities of lower interest rates for longer became a positive catalyst for both stock and bond prices. The yield on the benchmark 10-year U.S. Treasury Note spent the entire month of April trading with a one percent handle and finished the month yielding 1.82 percent. The 10-year Treasury began the year yielding 2.27 percent, so this has been an impressive move in a historically low rate environment. In addition to interest rates moving lower, corporate credit spreads for both high yield and investment grade bonds continued to tighten adding to bond returns. The bond market has exceeded return expectations to begin the year as evidenced in the chart below.

Commodities are even showing signs of life as both gold and oil are appreciating. Gold was up 3.32 percent in April and 19.98 percent on a year-to-date basis. Oil rebounded to $46 a barrel in April, up 15.58 percent for the month.

As time moves us through a variety of market gyrations, investors have important choices to make regarding their approach to investing. It is critical to employ a sound investing philosophy backed by an unwavering commitment to the long-term investment process. Some investors want to be invested when prices are appreciating and on the sidelines when markets decline. This is not realistic and often ends in making poor buy and sell decisions. A clear focus on proper asset allocation and risk tolerance are keys to long-term investment success. A combination of professionally managed investment strategies can help you properly navigate the volatile markets that lie ahead. Stay invested, stay committed!

To expand on these Market Commentaries or to discuss any of our investment portfolios, please do not hesitate to reach out to us at 775-674-2222