Job Growth, Other Data Show Economic Strength Rising

Here in the U.S., several economic indicators came in better than expected last week, including: U.S factory orders, durable goods orders, wholesale inventories and employment (as reported by ADP and by the Bureau of Labor Statistics).

In Europe, German industrial output in January was higher than expected and the UK raised its forecast for economic growth in 2017 to 2% from 1.4%. Also, the European Central Bank (ECB) raised its inflation forecast for 2017 and 2018, in a sign of optimism for the overall economy. The outlook for the European financial system also improved with the announcement that Deutsche Bank would move forward with a multi-billion-dollar plan to raise capital—a move that is expected to meaningfully improve its balance sheet.

In Asia, Japanese GDP growth was lower than anticipated. However, China reported surprisingly strong foreign currency reserves.

Meanwhile, crude oil prices tumbled last week as crude inventories rose to higher-than-expected levels. That development stoked fears that OPEC might not extend its production cuts into the second half of the year. OPEC’s meeting is May is expected to provide more clarity on the issue.

GAIN: Active Asset Allocation

Global equity markets were relatively muted last week, as investors take a “wait and see” approach in advance of the Federal Reserve Board’s next meeting later in March. Stocks have been on a nice run of late, and it’s not uncommon in such environments for investors to take a breather and digest recent gains.

Recent gains in the domestic market means U.S. stocks are now outperforming their foreign peers year to date. The Gain portfolios are overweight U.S. stocks relative to peers, and also favor emerging markets and dollar-hedged exposure to foreign equities.

Meanwhile, the bond market as a whole has been flat for the year. That said, high-yield bonds are up approximately 1% year to date. Interest rate rose last week as investors became increasingly convinced that the Fed is likely to raise a key short-term interest rate (the Federal Funds Rate) at its next policy meeting.

PROTECT: Risk Assist

Markets were relatively quiet ahead of the jobs report released last Friday. That report showed the U.S. economy added 235,000 new jobs in February—more than was expected.

Keep in mind our goals-based risk management strategies are designed to target defined outcomes that investors seek. In particular, they aim to narrow the scope of possible outcomes as a goal is approached.

SPEND: Real Spend

With all major U.S. and European monthly inflation announcements behind us, market prices for inflation expectations were muted for the week. While global stocks faltered somewhat, they continued to outpace fixed income year-to-date.