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MONTHLY MARKET REPORT: MARCH 2019
Investors shrug off yield curve inversion
Prepared by Brandon Yee, CFA, CAIA, and Thomas Connelly, CFA[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/6″][vc_single_image image=”4231″][/vc_column][vc_column width=”5/6″][vc_column_text]International Developed Equities Continue to Rally
International developed stock markets in the aggregate rose by 0.51%. The U.S. and the UK outpaced other developed regions, recording gains of 1.81% and 1.06%, respectively. Japan, Canada, and Europe ex UK lagged. Year-to-date returns have overturned much of 2018’s losses, reminding investors that staying invested is incredibly important.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”4901″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column width=”1/6″][vc_single_image image=”4237″][/vc_column][vc_column width=”5/6″][vc_column_text]Emerging Markets Up in March
Broader emerging markets posted a strong gain of 1.47% for the month. China and India recorded gains of 2.44% and 9.23%, respectively. Brazil and Korea took a step back, recording returns of -3.85% and -3.08%, respectively. Emerging markets should stand to benefit with the U.S. dollar cooling off and the central banks of developed nations refraining from further monetary tightening.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”4902″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column width=”1/6″][vc_single_image image=”4234″][/vc_column][vc_column width=”5/6″][vc_column_text]Consumer Staples and Information Technology Have Strong Month
Consumer staples and information technology recorded gains of 4.33% and 4.19%, respectively. Financials and industrials dropped, posting returns of -2.68% and -0.30%, respectively. Year-to-date returns are strong across all sectors with information technology leading the way.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”4909″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column width=”1/6″][vc_single_image image=”4232″][/vc_column][vc_column width=”5/6″][vc_column_text]Value Underperforms Growth
Value underperformed growth in the large-cap and small-cap space. Momentum recorded a gain of 1.17%. Historically, different equity factors have their own periods of outperformance, usually in shorter time periods but sometimes lasting a decade. However, tilting portfolios to capture more of the value and size premium has historically compensated investors globally in the long run.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”4907″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column width=”1/6″][vc_single_image image=”4233″][/vc_column][vc_column width=”5/6″][vc_column_text]Momentum Off to Strong Start
In the international developed markets, value underperformed growth in the large-cap space and in the small-cap space. Momentum recorded a gain of 1.74% while small-cap emerging market stocks posted a gain of 0.63%. Over a ten-year period, value has kept pace with growth while the size premium was positive in the international developed markets and the emerging markets.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”4908″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column width=”1/6″][vc_single_image image=”4236″][/vc_column][vc_column width=”5/6″][vc_column_text]Cash is a Viable Short-Term Investment Option
With the U.S. equity market trading at a high valuation and fixed income spreads low, investors can turn to cash and earn a competitive rate of return. Investors can earn a similar annual rate on cash versus those of intermediate-term bonds. The CPI increased by 1.50% year over year through February.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”4905″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column width=”1/6″][vc_single_image image=”4230″][/vc_column][vc_column width=”5/6″][vc_column_text]Emerging Market Bonds Off to Strong Start
The returns of deflationary hedges were primarily positive for the month. Long duration bonds outperformed with long-term government and municipal bonds returning 5.21% and 2.62%, respectively. The Barclays U.S. Agg Bond Index was up 1.92%. Emerging market bonds are up 6.59% year to date. Emerging market debt may warrant a higher portfolio allocation if developed market growth continues to slow and their high debt levels become burdensome.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”4906″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column width=”1/6″][vc_single_image image=”4235″][/vc_column][vc_column width=”5/6″][vc_column_text]Energy Starts Year Off Strong
Inflation-sensitive investment returns were mixed for the month. Crude oil and inflation-indexed bonds recorded gains of 4.59% and 3.91%, respectively. U.S. REITs and the Alerian MLP posted modest gains. Gold has recorded flat to modest returns during this bull market, but currently has favorable supply/demand dynamics and provides a valuable hedge against numerous late cycle risks.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”4903″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column width=”1/6″][vc_single_image image=”4238″][/vc_column][vc_column width=”5/6″][vc_column_text]U.S. Dollar Weakens over the Past Quarter
Over the past three months, the U.S. dollar appreciated against the euro and Swiss franc. Relative to the U.S. dollar, the British pound and Chinese yuan appreciated by 3.03% and 2.35%, respectively. After a period of U.S. dollar strength, investors in international securities may get a modest tailwind if the U.S. dollar depreciates any further.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”4904″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Brandon Yee, CFA, CAIA – Research Analyst
Brandon conducts investment due diligence for Versant Capital Management, and designs and implements tools and processes to support the firm’s research. His background in biology and finance help him to look at challenges from multiple angles, resulting in unique and well-rounded approaches and solutions.
Disclosure: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Versant Capital Management, Inc.), or any non-investment related content, made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Versant Capital Management, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Versant Capital Management, Inc. is neither a law firm nor a certified public accounting firm and no portion of the article content should be construed as legal or accounting advice. If you are a Versant Capital Management, Inc. client, please remember to contact Versant Capital Management, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Versant Capital Management, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.[/vc_column_text][/vc_column][/vc_row]
