Market Overview

In stark contrast to the final quarter of 2018, the first quarter of 2019 saw strong equity market gains across the globe. The US equity market, as measured by the S&P 500 Index, delivered its best quarterly performance since 2009 with a return of 13.5% in USD terms, with megacap stocks posting even stronger gains. Credit and commodity markets were also beneficiaries of the risk on environment, with spreads erasing much of the widening that occurred over November and December. The BofAML US High Yield Constrained Index, hedged into GBP, returned 6.8% over Q1 while a recovery in energy prices led the Bloomberg Commodity Index to a gain of 6.3%, in USD terms.

On the economic front, recent data (Source: SEI) continued to disappoint. Preliminary US services and manufacturing indicators released towards the end of the quarter that fell short of forecasts, accompanied with an inversion in the US yield curve (with 10-year yields falling below 3-month rates), increased concerns about the near-term economic outlook. With the US central bank no longer expected to raise interest rates this year, and having signalled a pause to its balance sheet run-off in September, government bonds generated positive returns over the quarter. UK government bond yields declined in sympathy with US yields, with the 10-year gilt falling by almost 30 basis points to end the quarter at 1.0%.

To read our full review of Q1 2019 download our report.