Our basic proxy for global inflation continues to fall further. The year-over-year change of the CPI of 33 countries (using a simple average) has fallen for eight straight months and now sits at just 1.42%.
The Barclays US Aggregate Treasury total return index is up nearly 6% year-over-year. This index has a modified duration of 5.75 years. Not a bad return considering the on-the-run 5-year treasury is currently yielding 118 basis points.
For the first time in exactly one year, over half the stocks (51%) in the MSCI World Index are outperforming the headline MSCI World Index over the past 252 trading days (1-year). This is the highest percentage of stocks outperforming in exactly one year.
Looking across the global equity markets, it is clear that an asset allocation approach based on sector exposures has worked better than any geographic allocation. In particular, an overweight allocation to the health care sector would have benefited portfolios tremendously.
Relative to the All Country World Index (ACWI), only four European countries’ constituents have managed to outperform– Belgium, Denmark, Ireland, and Switzerland (for now): Country indexes for Germany, Netherlands, and Sweden remain in trading ranges: In aggregate, stocks in Finland, France, Italy, and Spain have declined on a relative basis for years– but recently rallied
Consumer confidence in the US recently broke out to a 7+ year high. According to this survey, consumers feel pretty optimistic about their present situation and slightly less so about the future. Consumer confidence grew steadily throughout 2014. The growth in consumer confidence hasn’t (at least for now) directly led into significantly stronger retail sales.