With volatilities once again collapsing, we find ourselves in the Goldilocks scenario of risk asset generally performing well, while sovereign yields are falling near the low end of recent ranges. While longer term, there is conflict that both risk-on and risk-off assets can perform well, there are enough unanswered questions that can support the continuation of both lower yields and stable risk asset valuations in our view. Some of these questions include the weathers impact on recently weak data, global risk from emerging markets, China, the Ukraine and Russia, along with the ECBs and BOJs next moves. With February coming to a close, developed market equities have generally recovered most of their mid-January losses, while the S&P continues to flirt with record highs. Fixed income will also post its second consecutive month of gains, matching the best performance it was able to string together last year. Given the risk-on environment, high yield, preferred and USD denominated emerging market debt posted the strongest total return figures this month. Data continues to be mixed, although two of the more significant reports this week, durable goods and new home sales, beat expectations. We will start March next week, which means that we get the regular bevy of monthly readings from retail and auto companies, and, of course, the employment report next Friday. It is worth noting that we have the potential for yet another weather impacted report, as survey week occurred during yet another period of disruptive snowy weather. Read the full commentary now.
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