Monthly Market Commentary for February 2015
Domestic markets were lower across the board last month as investors reconsidered their tolerance for risk. The strengthening dollar and global economic weakness drove earnings growth well below expectations as the S&P 500, Dow Jones Industrial Average, and NASDAQ fell 3%, 3.58%, and 2.13% respectively. Equity markets abroad ended the month on the opposite side on the spectrum as developed markets gained 0.49% and emerging markets rose 0.55%. Although a strong U.S. dollar has hindered corporate earnings domestically, companies located in Japan and Europe, where their currencies have weakened, have benefited.
Bonds benefited from rising risk perception and slow earnings growth as the Barclays Capital Aggregate Bond Index rose 2.1%. The yield on the 10-year U.S. Treasury fell from 2.12% at the beginning of January to 1.68% to close the month.
The European Central Bank unveiled its long awaited attempt to rejuvenate the euro zone economy and counter deflation. Mario Draghi, ECB President, said the bank plans to purchase more than 1.1 trillion euros (equivalent to $1.3 trillion U.S. dollars) worth of government and private sector bond by September of next year. Investors applauded the decision; bond prices rallied, European equities rose, and the euro weakened.