news and events

Capital Markets Recap - February 2019



  • U.S. equities continued to rally through the month of February. Real GDP increased by an annualized rate of 2.6% in the fourth quarter. The deceleration in growth from the third quarter (3.4%) was partly due to a decrease in government spending during the government shutdown. The shutdown also contributed to the uptick in the unemployment rate (4.0%) which classifies furloughed federal employees as unemployed on temporary layoff. U.S. manufacturing saw softer improvements in operating conditions, but conditions are still solid and inflationary pressures relaxed. Business confidence recovered in February as market volatility subsided and the government shutdown ended.
  • International equities were positive and emerging market equities were flat in February. Eurozone manufacturing output was in negative territory for the first time in five-and-a-half years during February. New work orders fell by the steepest amount since April 2013 due to political and trade uncertainties. In Japan, headline PMI hit contraction territory due to reduced output and demand. The consumption tax hike in Japan this year increases fear of an economic downturn. China saw a rise in output and new orders, signaling an easing to their recent economic downturn. There is optimism regarding a trade deal with the U.S. after President Trump reaffirmed an extension of the trade truce beyond the March deadline.
  • Fixed income investments were mixed during the month. Strong demand and inflows into the municipal debt market have pushed prices up. The 10-year Treasury yield increased to 2.73% as investors sought out riskier assets in the month.


  • Broad U.S. stocks were positive (up 3.5%) for the month and on a 1-year basis (up 5.1%).
  • Size – Small-cap (up 5.2%) outpaced mid-cap (up 4.3%) and large-cap (up 3.4%) equities during the month and small-cap stocks led on a 1-year basis over large-cap stocks (5.6% vs. 5.0%).
  • Style – Growth stocks (up 3.8%) slightly outgained value stocks (up 3.2%) in February and continue to meaningfully outperform on a 1-year basis (6.6% versus 3.3%, respectively).



  • It is impossible to predict short-term market behavior, but markets tend to follow growth and earnings over long periods of time. Basing investment decisions on shorter time frames rarely result in successful long-term investment success. Patience and allowing time for the investment thesis of managers to play out is an important element to successful long-term investing.
Sources: Morningstar, Inc., Barclays Capital, Russell and MSCI, U.S. Bureau of Labor Statistics, The Conference Board, IHS Markit, The Federal Reserve (central bank of United States), The Bureau of Economic Analysis (U.S. Department of Commerce) & U.S. Department of Treasury

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