Quarter in Review
The first quarter ended on a happy note, as all major US asset classes posted positive results, with the broad market returning 11.07%. Asset class returns ranged from 9.54% for large growth stocks to 13.21% for small growth stocks. Across the size spectrum, small caps out-performed large caps. There was a positive value premium market-wide in the US, driven by the performance of large value and midcap value stocks; however, small cap value stocks underperformed small cap growth stocks.
International developed equities maintained strong performances, with all major asset classes posting positive absolute numbers in US dollars. Consistent with the fourth quarter, the US dollar appreciated relative to most major foreign developed currencies. Across the size and style spectra, small beat large and growth outperformed value. Asset class returns ranged from 3.13% for large value stocks to 6.26% for small growth stocks.
Many emerging markets posted negative returns for the quarter. There was a significant size premium, with small caps outperforming large caps by 5.8%. The value premium was negative across all size segments. The US dollar appreciated vs. most emerging markets currencies. Asset class returns ranged from -2.38% for large value stocks to 4.20% for small cap stocks.
International REITs outperformed US REITs by 38 basis points for the period. International REITs continued to post positive returns for the sixth consecutive quarter, while US REITs had their second consecutive quarter of positive returns.
Commodities settled slightly lower during the first quarter, somewhat offsetting a strong comeback at the end of 2012. Energy advanced, with natural gas providing significant total return during the period. Precious metals finished lower, as investors’ sensitivity to economic and geopolitical risks eased. Soft commodities generally finished lower.
Fixed income barely kept its head above water in the quarter as bond yields crept higher during the period, and U.S. equities rose to record levels, wiping out losses from the financial crisis. Global monetary policy remained accommodative, as central banks sought to maintain high levels of liquidity. These actions were taken to spur economic growth and protect the global financial system. Yield-seeking behavior has been rewarded over the past year, as lower credit-quality investments have outperformed.