After a very strong first quarter in global stocks, the U.S. stock and bond markets are telling very different stories. The stock market continues to lurch higher, driven by expected earnings, economic growth, and investor optimism. The bond market, on the other hand, is not so optimistic. A flattening and even inverted yield curve shows far less optimism in the U.S. economy.
The “right” take is probably somewhere in between these two extremes. The economic data shows a mixed bag. Jobless claims are at a 50-year low, but payroll gains in March came in lower than expected. The ISM Manufacturer’s Index was up sharply in March, but retail sales and durable goods orders fell.
Internationally, we continue to watch the UK Brexit proceedings and the country’s wrestling match with the European Union (and itself). First quarter stock returns were very strong abroad as well, but a key leading indicator shows that trouble may be brewing. This quarter’s market review will tackle all these topics, in addition to a very strong quarter for real estate investment trusts (REITs).