• Following a brief late-January swoon, markets raced ahead this week thanks to positive economic data and expectations that the economic impact of the coronavirus may not be as severe as initially feared. Year to date, the S&P 500 is up approximately 3.7%, adding to its 31% rise last year.1
  • The U.S. economy has shown improvement since late last year, and new data released this week (ISM manufacturing and services reports as well as another strong jobs report) further supported investors’ positive outlook.
  • As sentiment has improved, however, neither the bond market nor Fed forecasts appear to be expecting any notable acceleration from the slow and steady growth of around 2% that the U.S. economy has achieved since 2010.
  • As the chart shows, while the S&P 500 has moved progressively higher over the past 12 months, the 10-year U.S. Treasury yield, often viewed as a bellwether for economic growth, has steadily declined.1 Additionally, market-based rate expectations currently imply the Fed will cut rates once more in 2020, typically a sign of an economic slowdown.1
  • Despite the stock market’s rise, a backdrop of mild economic growth and a prolonged low interest-rate environment suggests investors may need to continue seeking alternative sources of income as the current lower-for-longer environment appears likely to endure.

1 Bloomberg Finance, L.P., as of February 6, 2020.


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