The following is the Russell Investments Chief Investment Officers’ views of the key themes affecting market performance in March 2016. All data is as of March 31, 2016. Sources and indexes used to represent asset classes can be found in the disclosures at the end of this post.
1. Fed slows pace of tightening
Concerns about market volatility, global growth and inflation expectations led the Federal Reserve (Fed) to adopt a more cautious approach to hiking rates. While hawkish members have voiced disagreement, Fed leadership appears content to now raise rates twice in 2016 – a view that is consistent with our own Global Market Outlook – Q2 Update Report.
2. Recession fears drop as U.S. economic data strengthens
The U.S. economy proved resilient again at the start of 2016. The labor market added over 200,000 jobs per month in the face of significant uncertainty. The manufacturing sector showed signs of bottoming out. The U.S. economy continued chugging along, and that was good enough to drive a rebound in investor sentiment for March.
3. U.S. dollar weakens
The U.S. dollar depreciated 4% over the first quarter of the year. We view this behavior as consistent with the dollar peaking as expensive valuations and a slower pace of Fed rate hikes (from four to two) limited further upside.
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