Market Review and Outlook: 3rd Quarter 2014
October 20, 2014
This commentary recaps the previous quarter and discusses our outlook for the next quarter.
- During the 3rd Quarter of 2014, US stock and bond markets remained calm despite a confluence of potentially unsettling geopolitical events.
- Most US economic indicators were positive in the quarter, such as revised 2nd Quarter GDP at 4.6%, non-farm payrolls average of 223,550 per month, and increased housing starts and homes sales.
- Steady flows into municipal mutual funds continued and new issuance of municipals remained historically low.
- The bull flattener continued as yields of longer bonds declined more than the yields of shorter bonds.
- The short end of the yield curve remains relatively steep.
- Net after-tax yields of shorter maturity US Treasury securities were higher than comparable maturity municipals for the first time since the financial crisis.
- Samson implemented a target allocation of 10-23%, depending on clients’ tax rates, in Treasuries of maturities of approximately 3 years.
- The Fed may remain cautious about raising rates soon as they are sensitive to the turbulence that could result in bond markets everywhere were it to move against the global trend of ready liquidity during next 6 to 12 months.