Quarterly Recap - 1^st Quarter 2015

¹ Morningstar Direct (all performance percentages are total return based, which include reinvested dividends, interest)

• The S&P 500 finished at 2,067 after reaching an all-time high of 2,117 on March 2, 2015.
• U.S. 10-year Treasuries returned 1.05% more than comparable sovereign G7 counterparts.
• After a 17% 2014 plunge, the Bloomberg Commodities Index fell 6% further during the 1Q.

Despite the fact the S&P 500 declined in March, the first quarter marked the ninth consecutive quarterly gain, albeit a modest sub-1% return for the index. According to S&P Capital IQ, since World War II, there have only been three occurrences that this index has seen nine or more consecutive quarters of positive performance: fourth quarter 1953 to first quarter 1956, third quarter 1962 to first quarter 1965 and first quarter 1995 to second quarter 1998. Essentially, U.S. equities have swung between monthly gains and losses this year as mixed economic data prompted concerns regarding whether or not the economic recovery has enough strength to warrant higher interest rates. The Federal Reserve in March removed its policy language that it remains “patient” to keep rates at exceptionally low levels, while at the same time saying it will only raise rates when economic data adequately supports a move. Economists are divided with some expecting the first rate hike to occur later this year and others not until 2016. A 12.5% YTD plunge in oil prices and the continuing strength of the US dollar, rising 11% against the euro so far this year, has also weighed on investor sentiment.

Small-cap U.S. companies outperformed large-cap stocks during March and the quarter. The Russell 2000 Index, a broad measure of small-cap equity performance, rose 1.7% last month and 4.3% during the first quarter. The Russell Mid Cap Index likewise outperformed, returning 0.1% in March and 4% during the quarter.

Growth outperformed value in March and during the quarter. The Russell 1000 Growth Index fell 1.1% last month, but gained 3.8% during the quarter, whereas the Russell 1000 Value Index lost 1.4% in March and declined 0.7% during the quarter.

All but one of the ten major sector groups declined in March, with Materials (-4.7%) and Telecom (-3.7%) falling the most, while merger activity helped to lead Healthcare (+0.9%) higher. For the quarter, six of the ten primary sectors advanced, led by Healthcare (+6.5%), Consumer Discretionary (+4.8%) and Telecom (+1.5%). Utilities, the best performing sector last year (up 29%), is this year’s worst performer, down 5.2% YTD, followed by Energy (-2.9%).

Developed markets outside the U.S. and Canada, as measured by the MSCI EAFE Index, slightly outperformed U.S. equities during the month (declining 1.5%), while significantly outperforming them during the quarter (+4.9%). The MSCI Emerging Markets Index also outperformed U.S. equities in March and in the first quarter. China’s Shanghai Composite has surged 17% so far this year.

The Barclays U.S. Government Bond Index rose 0.6% last month, extending first quarter gains to 1.6%. Benchmark 10-year Treasury yields fell for a fifth consecutive quarter, declining by 25 basis points to 1.92%. Below-investment grade high-yield corporate bonds lost 0.6% last month, trimming YTD gains to 2.5%, as measured by the Barclays U.S. Corporate High Yield Index. Investment grade bonds, as measured by the Barclays U.S. Aggregate Bond Index, crept 0.5% higher in March, extending YTD returns to 1.6%. The Barclays Municipal Bond Index rose 0.3% last month, leading to a first quarter gain of 1%.

This information is compiled by Cetera Investment Management.

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No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The opinions expressed are as of the date published and may change without notice. Any forward-looking statements are based on assumptions, may not materialize, and are subject to revision.

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