During the quarter, US stock prices surged as sentiment improved regarding both monetary policy and US-China trade negotiations.
Select Equity trailed during January, then outperformed during February and March. All quant portfolios out performed for the quarter overall. Most large cap portfolios generated all of their excess returns during the January. Mid Cap and small cap portfolios were able to outperform in both January and March.
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During March, trade continued to be a dominant theme. US stocks started the month with a solid gain as investors shrugged off weaker than expected manufacturing data delivered on Friday, March 1. Sentiment shifted over the weekend following the release of two studies highlighting the negative impact of the current trade war on the US economy showing the burden falling mainly on consumers. Stocks declined the entire week, leaving the S&P 500 down more than 1.4% for the month overall at the March 8 close. On March 11, the combination of a solid retail sales report and Nvidia’s announcement that it planned to purchase Mellanox launched a strong three-day rally. By the close on March 13, the S&P 500 was up 0.9% for the month overall. On March 14, US stocks posted a modest decline following reports that an expected meeting between Presidents Trump and Xi to sign a US-China trade deal would likely be postponed until April. The US stock market rally resumed on March 15 helped along by China’s announcement of a cut in value-added taxes and a stronger than expected earnings report from Broadcom. On March 20, a surprisingly dovish statement from the Federal Open Market Committee following the conclusion of its policy meeting prompted a sharp rally in US equities. Although the US market was unable to sustain this rally through the close, follow through in foreign equity markets prompted a sharp rise in US equities the next day. By the March 21 close, the S&P 500 was up 2.5% for the month overall. On March 22, a report of weaker than expected German manufacturing data raised concerns about slowing global economic growth and triggered a world-wide selloff in equities. The arrival of senior US officials in China on March 27 raised hopes that trade negotiations were nearing completion and helped the US market close the month with a two-day rally.
Select Equity benefited from its general emphasis on stable stocks. Mid cap and small cap quant performed well. Large cap quant portfolios trailed due to being overweight Biogen as the stock declined 30%. Extended Large Cap was hurt by timing of a client withdrawal request.