Dollar strengthens, financial assets give back gains

• The dispersion of returns between small cap and large cap equities widened in the 3rd quarter with the Russell 2000 index underperforming the S&P 500 index by 850 bps. The rotation from small to large cap stocks is due to small companies’ relatively unattractive valuations and less capitalized balance sheets – making it harder for them to find financing and more susceptible to rising interest rates. Non-U.S. stock performance also struggled on the quarter in dollar terms but fared much better with currency risk hedged out
• U.S. interest rates ended the quarter generally where they started, with the exception of the yield curve flattening slightly. High yield spreads widened by the most since the 3rd quarter of 2011 causing high yield and leveraged loan securities to underperform. Non-U.S. fixed income was the worst performing segment of the fixed income market, being particularly hurt by negative currency contribution
• Inflation Protection Assets, in aggregate, gave back most of this year’s gains in the 3rd quarter. The U.S. Dollar strengthened against a basket of currencies, Headline CPI came in below forecasts, and inflation expectations dropped significantly in the quarter causing commodities and natural resource equities to fall in excess of 10%

• 3Q14 Global Positioning Statement™ 
• 3Q14 Global Equity Review
• 3Q14 Fixed Income Review
• 3Q14 Hedge Fund Review
• 3Q14 Private Equity Review