U.S. economic data for the week was mixed. Initial jobless claims were slightly higher than expected, but remained near historically low levels. Meanwhile, housing starts, inflation (CPI), the Federal Reserve Bank of Philadelphia’s manufacturing business outlook survey, and the Empire State manufacturing survey (which assesses New York area manufacturing) were all weaker than expected.

As earnings season continued last week, several sectors posted impressive results. Shares of financial services firms (especially banks) rose sharply on better-than-expected first-quarter earnings, as did technology stocks (driven by strong profits among semiconductor manufacturers).

In contrast, commodity-related equities underperformed for the week, as precious metals and energy prices fell.

Overseas, European consumer confidence came in ahead of expectations—another sign that Europe’s economic recovery continues to gain momentum. International equities underperformed U.S. markets, however, as uncertainty heading into French elections this weekend tempered returns for European stocks.

In the fixed-income markets, corporate credits—including convertible bonds, high-yield bonds and preferred stocks—outperformed for the week, driven by strong corporate earnings results. International fixed-income securities, especially emerging markets bonds, also posted strong returns for the week primarily due to currency strength. In contrast, inflation-linked bonds (TIPS) underperformed as expectations for the passage of an economic stimulus package in the near-term faded.

GAIN: Active Asset Allocation

Global equity markets found their footing last week following the previous week’s losses, as strong earnings results helped support stock prices. Domestic stocks outperformed foreign markets, while growth beat value and small-caps outpaced large-company shares.

We continue to overweight U.S. growth stocks in the Gain portfolios, which helped last week as energy (a key segment of the value style) struggled to keep pace with the growth-oriented technology sector.

In the bond market, interest rates were flat for the week and high-yield bonds outperformed Treasury securities. Our overweight to corporate bonds was beneficial in that environment.

PROTECT: Risk Assist

Global investors expressed some uncertainty last week as they waited for France’s first-round presidential election vote to take place on Sunday, causing markets to churn. In general, hedges in equities and currencies were being put in place ahead of that vote. The Risk Assist portfolios took no hedging actions during the week, however, as nothing materially changed in the financial markets regarding risk.

SPEND: Real Spend

Although interest rate volatility has increased lately, market expectations for inflation have remained relatively stable—a surprising development, as interest rates and inflation expectations typically move in tandem.

During the past year, U.S. stocks have outperformed U.S. bonds by more than 12 percentage points. This large spread further reinforces our conviction that equity-focused retirement income portfolios can help to generate the returns needed to combat longevity risk during retirement.