Market Commentary

As we forewarned at the beginning of the year, volatility has re-entered the markets. Recently stocks and, interestingly, bonds, have been characterized by poor performance in both the U.S. and Europe. Typically mixed economic data would trigger a bond rally as investors engage in a “flight to quality" but instead, investors sold bonds last week, driving prices down and yields up. This combination –mixed earning reports and rising yields -- pushed stocks lower last week.

The losses were particularly severe for rate-sensitive stocks such as utilities. U.S. stocks continue to struggle with the outlook for corporate earnings, mostly due to the dollar's strength, while bond market's anticipation of the rate hike combined with uncertainty about the timing has seen accelerated bond selling. One area demonstrating surprising resiliency and growth in the face of this volatility and drop in prices is emerging markets, although even this area is likely to experience more volatility as we get closer to a rate hike by the Federal Reserve.

One area demonstrating surprising resiliency and growth in the face of this volatility and drop in prices is emerging markets, although even this area is likely to experience more volatility as we get closer to a rate hike by the Federal Reserve.