Positive Global Growth Leads to Risk-On Rally
- Positive global economic data led to a rally in risky assets over the quarter. Emerging markets outperformed all major asset classes as improving global growth characteristics resulted in better trade prospects. Risk-on assets also benefited as U.S. trade and protectionist concerns subsided.
- In U.S. equities, growth beat value and large-caps beat small-caps, reversing the previous quarter’s trend. Many of the popular “Trump trades” stalled in 1Q amidst policy uncertainty, while technology stocks rallied as investors sought sources of idiosyncratic growth.
- Fixed income generated positive performance despite the Fed hiking rates in March. While the rate hike was somewhat unexpected in the beginning of the year, the Fed reiterated its cautious and data-dependent stance to normalizing interest rates. Spread sectors continued to tighten on the back of strong corporate data. Local currency EM debt outperformed as investors shifted to higher growth regions.
- Energy-related assets generated negative returns as higher U.S. inventory levels and OPEC production uncertainty put downward pressure on oil prices. Base metals posted positive performance on the back of higher global infrastructure demand.
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