Market Review and Outlook: 1st Quarter 2015
April 22, 2015
This commentary reviews the previous quarter and discusses our outlook for the next quarter.
- The 1st quarter of 2015 was a continuation of the bond rally that characterized much of 2014.
- Declining inflation concerns due to the drop in oil prices, a disappointing Q4 2014 GDP reading, and the introduction of the ECB’s bond buying program all helped lead rates lower.
- Falling unemployment combined with low wage growth, low inflation, and the Fed dropping the word “patient” from their statements, lead to conflicting predictions of when rates might finally rise.
- Despite a surge in issuance in the first quarter due municipalities refunding at low rates, the outlook for municipal bonds remain positive. Mutual fund inflows continued and state and local credit quality continued to improve.
- Looking Forward: The next few quarters may play out similarly to 2014, as we see the harsh winter impact on GDP growth. Fed Board members indicate that any fed rate increases, whenever those might occur, will be spread out and data dependent.