After day to day volatility in recent weeks, the markets resumed a pattern of generally steady increases. US markets were up almost 1% for the week. FutureAdvisor’s focus on international diversification was a source of strength as both developing and emerging markets outperformed even the US market’s solid growth. Real estate (REITs) also grew faster than the US market. Fixed income investments generally lagged the stock market, but were still in positive territory.
Economic data continues to be good. Unemployment has now fallen to 6.3% and is falling faster than many expected. However, we believe part of this decline is a result of individuals leaving the labor force at a relatively high rate, and this is a structural concern for longer term growth. Nonetheless, there remains clear unemployment improvement even after adjusting for this reduction. The Federal Reserve statement yielded no surprises and the reduction of the rate of Federal Reserve bond purchases (often referred to as tapering) continues at its expected pace.
Economic growth for the first quarter came in at a very low 0.1% for the US, but the data, as with other recent economic releases, suggests that this weakness was primarily extreme weather related and the economy has now regained momentum in recent weeks. Other data releases this week suggested continuing recovery, and even some rebounds in housing activity, which up until now has been a relative weak point.
Corporate earnings continue to be broadly ahead of expectations. Exxon Mobil reported good results, whereas those from Chevron were poor. Twitter’s post-earnings decline showed that the market continues to focus closely on the technology company’s growth prospects.