Market Perspectives (January 2013)
- Equities edged higher in December on hopes that policymakers would avoid taking the economy off the fiscal cliff. International equities, which trailed domestic equities throughout most of the year, staged a late rally to pull ahead of U.S. stocks in the closing weeks of 2012. Equity indexes ended the year with solid double-digit returns across the board.
- The Treasury yield curve steepened in December, creating a headwind to higher-quality bonds, which lost ground during the month. Over the course of the year, range-bound yields allowed bonds to post modest gains.
- Falling energy costs drove an easing of inflationary pressures in November. Modest inflation, stubbornly high unemployment, and lackluster growth continue to provide the Fed with ample room to pursue its exceptionally accommodative policy.
- Economic growth accelerated in the third quarter, but is believed to have slowed anew in the final months of 2012. Job creation was high enough in December to hold the unemployment rate steady.
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