Market Perspectives (March 2013)

by Jim Baird on March 20, 2013

Executive Summary

  • Although volatility spiked briefly in February, domestic stocks persevered and continued their climb. Gridlock following the elections in Italy led to another flare-up in Europe, contributing to a slight pullback in international stocks during the month.
  • The yield curve flattened in February, providing a modest boost to bonds. However, this exceptionally low interest rate environment continues to present challenges for conservative investors struggling to find returns in the bond market.
  • The minutes from January’s FOMC meeting suggested some division within its ranks about the optimal path for monetary policy and the potential negative effects of the current policy path. Markets were reassured days later by Bernanke’s congressional testimony in which he reaffirmed the Fed’s commitment to its ultra-accommodative monetary stance.
  • Inflation remained muted in January, but inflation expectations are starting to edge higher amid that unprecedented monetary easing.
  • The employment situation improved in February as job creation exceeded expectations, helping to bring the unemployment rate down to its lowest point in four years.

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