February 2015 Flash Report

In contrast to January, stock returns were extraordinary in February, bonds generally lost money, oil prices rebounded nicely, and the US dollar slowed its rate of appreciation against most currencies. Growth and inflation data help explain much of the returns, although central bankers remain at the heart of the story. Fed Chair Yellen’s comments reassured markets about the timing and risks of US interest rate increases while policymakers in Europe and Japan commenced QE similar to what has driven US equity returns. Other central banks, including the People’s Bank of China (the “PBOC”), have eased interest rates as well. Importantly, near-zero interest rates and low bond yields characterize the major advanced economies. In this environment, fixed income assets offer little income or opportunity for capital appreciation and hence meager prospective total returns.

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