Markets & Economy

Monthly Market Review

March 2019
T. Rowe Price

The major indexes ended mixed in March, with the large‑cap benchmarks recording gains and the small‑cap indexes seeing moderate losses. The technology‑heavy Nasdaq Composite Index performed best and ended the month as the leader for the year‑to‑date period. Performance varied widely within the S&P 500 Index, as a sharp drop in long‑term interest rates augured poorly for bank lending margins and took a took a toll on financial shares while resulting in good gains for real estate stocks. Technology stocks also performed well, bolstered by a solid rise in Apple shares as investors appeared to welcome the tech giant’s turn to services, including a new video streaming platform. Consumer discretionary stocks also did well, helped by gains in Amazon.com.

The month was notable for the largest initial public offering for the year to date, which valued ride‑sharing company Lyft at around $30 billion after trading began on March 29. The fatal crash of another 737 Max 8 airliner at mid‑month took a toll on Boeing shares, which had been the best performer in the Dow Jones Industrial Average so far in 2019.

Growth Fears Preoccupy Investors, But Trade Optimism Grows

Stocks started the month on a decidedly down note, suffering their worst weekly loss to date in 2019, as several worrisome signs about the health of the global economy weighed on sentiment. Most concerning may have been the decision by the European Central Bank on March 7 to inject further liquidity into the eurozone’s banking system with a new round of cheap loans to banks in an attempt to spur loan growth and economic activity. Investors also appeared unsettled by China’s announcement of new fiscal stimulus directed at its manufacturing sector.

Fading hopes that a U.S.‑China trade deal would soon be announced also seemed to weigh on sentiment early in the month, but prospects for an eventual agreement brightened a bit as March progressed. The S&P 500 Index recorded its best daily gain for the period on March 11, after the head of China’s central bank pledged that China would not devalue its currency to boost exports or to use it as a weapon in trade disputes. On March 22, U.S. President Donald Trump told an interviewer that the two sides were “getting very close” to a trade deal with China, as U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin prepared to travel to Beijing for the next round of face‑to‑face talks. Mnuchin’s tweet that the talks had been constructive seemed to be one factor in the market’s strong rally on March 29, the last trading day of the month.

Conversely, global growth fears only seemed to deepen as March progressed. Wall Street followed other major markets lower at mid‑month following news of a steep contraction in the German manufacturing sector. Gauges of activity in the U.S. service and manufacturing sectors indicated continued expansion but at a slower pace than expected. More concerning may have been housing signals. Construction of new homes fell sharply in February, and year‑over‑year price gains fell to their lowest level since 2011. Despite a recent drop in mortgage rates, pending home sales extended a stretch of declines dating to late 2017, although actual sales picked up somewhat. Data on consumer spending and business investment also generally proved disappointing.

U.S. Indexes
Total Returns

 

March

Year-to-Date

Dow Jones Industrial Average

0.17%

11.81%

S&P 500 Index

1.94 13.65

Nasdaq Composite Index

2.61

16.49

S&P MidCap 400 Index

-0.57

14.49

Russell 2000 Index

-2.09

14.58

Past performance is not a reliable indicator of future performance.
Note: Returns are for the periods ended March 31, 2019. The returns include dividends based on data supplied by third‑party provider RIMES and compiled by T. Rowe Price, except for the Nasdaq Composite Index, whose return is principal only.
Sources: Standard & Poor’s, LSE Group. See Additional Disclosures.

Fed Signals Dovish Turn

Signs of an increasingly dovish turn in monetary policy seemed to allay growth concerns and support markets. As was widely expected, the Fed kept interest rates unchanged at its March 19–20 policy meeting, but stocks appeared to get a boost from the summary of individual policymakers’ economic and policy projections released after the meeting—most notably, 11 of the 17 Fed officials who set policy now expect no rate hikes in 2019, while four expect just one. Indeed, markets ended March pricing in a significant chance of a rate cut in 2019.

Driven in part by the Fed’s dovish tilt, long‑term bond yields fell sharply, resulting in a partial inversion of the yield curve—a typical (though not perfectly accurate) harbinger of a coming recession—over several days late in the month. On March 29, however, the yield curve began to tilt slightly upward again, which may have been another factor helping stocks end the month on a high note.

Slowing Growth And Earnings Highlight Importance Of Stock Selection

The Fed’s dovish turn and growing hopes for a U.S.‑China trade deal have moderated two of the primary sources of uncertainty that derailed markets late in 2018. The growth worries that emerged in late 2018 remain a more persistent concern, but it seems likely that a recession will be averted in the coming year. Earnings growth will be harder to come by, however, as the impact of the December 2017 tax cuts on year‑over‑year comparisons rolls off and fiscal stimulus wanes. This could favor an active approach to investing, along with careful fundamental research to find companies able to leverage competitive advantages to prosper in a more challenging environment.

Additional Disclosures
London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2019. FTSE Russell is a trading name of certain of the LSE Group companies. “Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

The S&P 500 Index and S&P MidCap 400 Index are products of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”) and have been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); T. Rowe Price is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index and S&P MidCap 400 Index.

Important Information
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action. The views contained herein are those of the authors as of April 2019 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

Developed non‑U.S. equity markets rose slightly in March but lagged large‑cap U.S. shares. Hopes of easing U.S.‑China trade tensions buoyed stocks, but worries about slowing global growth weighed on investor sentiment. The MSCI EAFE Index, which measures the performance of stocks in Europe, Australasia, and the Far East, returned 0.74%. Within the index, nine of the 11 sectors rose, led by consumer staples and real estate. Financials and consumer discretionary declined.

Growth stocks in the EAFE index gained 1.85%, outperforming value shares, which returned ‑0.38%. Emerging equity markets also rose slightly, led by gains in Asia, where stocks in China’s A share market rose more than 6%, as measured by MSCI. Stocks in Latin America lost 2.51%, pressured by losses in Chile and regional heavyweight Brazil. 

European Stocks Rose But Remain Pressured By Slow Growth And Political Uncertainties

European equities performed in line with the EAFE index but remained under pressure amid continued signs of slowing global and eurozone growth, Brexit brinkmanship, and ongoing uncertainty about U.S.‑China trade negotiations.

Uncertainty Deepens As UK Parliament Says No To Brexit Plan For Third Time

After another month of politicking, the British Parliament voted against Prime Minister Theresa May’s Brexit deal for the third time. T. Rowe Price Fixed Income Portfolio Manager Quentin Fitzsimmons said uncertainty deepened considerably in the wake of these votes. He said possible outcomes include the loss of a prime minister, European Union (EU) backlash about a long extension, or a snap election. Before the most recent vote, EU negotiator Michel Barnier warned Britain that it would have until April 12 to tell the EU what it wants to do in the event that the vote failed. 

European Central Bank Adopts Surprise Dovish Tone; 10‑Year German Bund Yield Turns Negative

The European Central Bank (ECB) surprised markets by taking a more dovish tone than anticipated in announcing that it would keep short‑term interest rates unchanged, at least through the end of 2019. For investors, the move seemed to underscore the negative impact that trade tensions and geopolitical concerns are having on the eurozone and around the globe. The yield on the benchmark 10‑year German bund fell to ‑0.07% from 0.18% at the beginning of the month. It traded below 0% for the first time since 2016, prompting the ECB to discuss measures that could help it maintain an ultra‑accommodative policy for longer and perhaps loosen it further. In addressing those measures, ECB President Mario Draghi noted that the bank is beginning to worry about the adverse effects of negative interest rates, which were introduced about five years ago to encourage European banks to lend. Earlier in March, the ECB launched the third round of a program to help banks extend credit to customers in hopes of stimulating the economy. The targeted longer-term refinancing operations (TLTRO III) consists of two‑year loans to help avoid a squeeze on credit. 

International Indexes
Total Returns

MSCI Indexes

March

Year-to-Date

EAFE (Europe, Australasia, Far East)

0.74%

10.13%

All Country World ex-U.S.A.

0.68

10.43

Europe

0.72

11.00

Japan

0.73

6.85

All Country Asia ex-Japan

1.73

11.45

EM (Emerging Markets)

0.86

9.95

Past performance is not a reliable indicator of future performance.
All data are in U.S. dollars and represent gross returns as of March 31, 2019.
This table is shown for illustrative purposes only and does not represent the performance of any specific security.
Source: MSCI. See Additional Disclosures.

Japanese Equities Rise For Third Month

Stocks in Japan edged higher in March, while the yen fell about 0.6% against the U.S. dollar. The Topix 100 and the Tokyo‑based Nikkei 225 were both down slightly in yen terms.

Japan’s Exports Hit By Slowing Growth And Trade Tensions

The Japanese economy and its companies have come under pressure from a Chinese slowdown and from the U.S.‑China trade dispute, which have particularly hurt the country’s export sector. In mid‑March, the Ministry of Finance reported Japanese exports fell for a third month in February, suggesting that the Bank of Japan may be forced to offer more stimulus to temper the effects of the slowing external demand and trade frictions.

Emerging Markets Outperform Developed Market Peers

Emerging markets stocks produced positive returns and marginally outperformed developed markets. The MSCI Emerging Markets Index returned 0.86%. Emerging Asian markets were widely mixed. Chinese stocks advanced more than 2%, but the Chinese A shares market rose more than 6%, thanks in part to positive momentum in trade talks with the U.S. and Beijing’s assurances that they would support the economy. The MSCI EM Latin America Index fell 2.51%, dragged lower by declines in Chilean and Brazilian markets, which countered the positive performance of Colombian stocks. 

The Europe, Middle East, And Africa (EMEA) Index Fell

Losses in Turkish and South African stock markets pressured the EMEA region, which lost 1.31%. In Turkey, shares fell almost 15% in dollar terms as the lira dropped about 5.6% versus the U.S. dollar. Turkish assets slumped at month‑end after data showing an unexpected fall in Turkey’s cash reserves raised suspicions that the central bank was using its holdings to prop up the lira ahead of March 31 elections, causing foreign investors to sell the currency. Russian shares gained about 1% amid rising oil prices. 

Outlook: Global Growth Is Slowing

We expect global growth to moderate against the backdrop of ongoing trade tensions, slowing Chinese demand, and geopolitical disrupters, including policy uncertainty in Italy and, to some extent, in France, as well as uncertain Brexit negotiations. On the bright side, domestic demand in the euro area has been resilient thus far and appears to be strengthening. However, a continuation of trade tensions could exacerbate the current slowdown, especially if tensions spread to the EU as well, and in trade driven economies like Germany. In our view, Chinese monetary and fiscal stimulus have the greatest potential to drive global growth higher. Lower oil prices should give growth a boost among oil importers, including Europe, China, and India. While some of the political risks that had hung over emerging markets countries—such as elections in Brazil and Mexico and severe currency weakness in Turkey—have eased, myriad geopolitical and trade issues remain that could spark risk‑related selling and derail markets. Other challenges to the outlook for global equities include the possibility of central bank policy missteps and the rising popularity of anti-establishment and populist political parties. 

Additional Disclosures
MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

Important Information
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of April 2019 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

The yield of the benchmark 10‑year Treasury note tumbled in March as Federal Reserve policymakers shifted their interest rate forecast amid signs of a slowing economy. After starting the month at 2.73%, the 10‑year Treasury note hit a 15‑month low of 2.39% on March 27 before finishing March at 2.41%. The 10‑year Treasury yield has fallen from a 12‑month high of 3.24% on November 8, 2018. (Bond yields and prices move in opposite directions.)

In Policy Shift, Fed Expects No Rate Hikes In 2019

After its March monetary policy meeting, the Fed released a summary of economic forecasts showing that the majority of Fed officials who set policy now expect no rate hikes in 2019. The revision to December’s forecast, which indicated that two rate hikes were likely this year, helped spark a rally in Treasuries. At the end of the month, the futures market showed that investors had an even more dovish outlook and were anticipating at least one rate cut by year‑end.

At his post‑meeting press conference, Federal Reserve Chairman Jerome Powell said that the policy revision was a result of a changing economic backdrop. He acknowledged that growth in U.S. consumer and business spending had slowed in recent months and pointed to a more pronounced slowdown in European economies. The Fed also announced that it will conclude the reduction of its Treasury holdings at the end of September.

Some portions of the Treasury yield curve inverted during the period, as yields on securities with shorter maturities declined less than those offered by longer maturities. Three‑month Treasuries yielded more than the 10‑year note for nearly a week in March—its first inversion since 2007—but finished the month with a more normal, although nearly flat, curve. An inverted curve has often predicted recessions in the past, although there have also been false positives, and the start of a downturn can lag an inversion by a significant amount of time. The longer‑maturity end of the yield curve remained upward sloping during the month.

Total Returns

Index

March

Year-to-Date

 

Bloomberg Barclays U.S. Aggregate Bond Index

 1.92%

 2.94%

 

J.P. Morgan Global High Yield Index

 0.98

 7.06

 

Bloomberg Barclays Municipal Bond Index

 1.58

 2.90

 

Bloomberg Barclays Global Aggregate Ex-U.S. Dollar Bond Index

 0.71

 1.52

 

J.P. Morgan Emerging Markets Bond Index Global Diversified

 1.42

 6.95

 

Bloomberg Barclays U.S. Mortgage Backed Securities Index

 1.46

 2.17

 

Past performance is not a reliable indicator of future performance.
Figures as of March 31, 2019. This table is shown for illustrative purposes only and does not represent the performance of any specific security.
Sources: RIMES, as of March 31, 2019; Bloomberg Index Services Limited, J.P. Morgan. See Additional Disclosures.

Investment‑Grade Corporate Bonds Outperform; Munis Benefit From Shrinking Supply

Accommodative monetary policy news and the decline in Treasury yields helped drive positive results in nearly all fixed income segments for the month. Corporate bonds were the strongest sector in the Bloomberg Barclays U.S. Aggregate Bond Index, supported by robust demand and manageable levels of new issuance. Intermediate‑term and longer‑maturity Treasuries also outperformed, while mortgage‑backed securities recorded positive returns but lagged the broader U.S. investment‑grade bond market. Treasury inflation‑protected securities lagged nominal Treasuries as inflation expectations moderated during the month.

Investment‑grade municipal bonds were supported by a solid technical backdrop. Issuance in March declined 7% from the same period in 2018, according to Bond Buyer data, and cash flows into the asset class were consistently positive throughout the first quarter. Longer‑maturity munis and below investment‑grade segments such as tobacco bonds and Puerto Rico debt produced strong returns.

U.S. Treasury Yields

Maturity

February 28

March 31

3-Month

2.45%

2.40%

6-Month

2.50

2.44

2-Year

2.52

2.27

5-Year

2.52

2.23

10-Year

2.73

2.41

30-Year 3.09 2.81

Source: Federal Reserve Board.

High Yield Bonds Finish Strong Quarter

High yield corporate bonds lagged their investment‑grade counterparts for the month but recorded their best first quarter since 2003 and easily outpaced the broader fixed income universe for the three‑month period. A light new issuance calendar and inflows supported performance in March. Within the high yield market, renewed uncertainty over the future of the Affordable Care Act weighed on health care issuers. Floating rate loans lost ground for the month amid outflows.

ECB To Hold Rates Steady, Lowers European Growth Forecast

Non‑U.S. developed market bonds delivered positive returns but underperformed most other fixed income segments for the month. In a major policy reversal at its March meeting, the European Central Bank (ECB) altered its forward guidance, stating that rates would remain unchanged at least through the end of 2019. The dovish announcement came as the bank lowered its 2019 growth forecast to 1.1% from 1.7%. The ECB also announced a third series of its targeted longer-term refinancing operations (TLTRO), which allow banks to borrow at the 0% refinancing rate for two years and are intended to help avoid a credit squeeze that could weigh on the European economy. Yields of benchmark 10‑year government debt in Germany and Japan fell below zero for the first time since late 2016.

Emerging Markets Bonds Benefit From Solid Demand

Emerging markets bonds were supported by strong demand and the Fed’s more dovish monetary policy stance. In country‑specific developments, several emerging markets issuers struggled with currency weakness. In response to a sliding lira, Turkey’s central bank tightened monetary policy and took steps to deter bets against the lira and stem a decline in foreign currency reserves. Credit spreads on Turkish government bonds widened to levels not seen since late 2018. Meanwhile, the Argentine peso reached new all‑time lows versus the U.S. dollar, possibly due to concerns about Argentina’s October elections.

Outlook: Brazil And China Are Favorably Positioned In The Credit Cycle

Mark Vaselkiv, T. Rowe Price’s chief investment officer of fixed income, notes that global credit cycles are increasingly unsynchronized, which presents risks and opportunities for fixed income investors. He believes that the best opportunity for long‑term investors is to invest in countries such as Brazil and China where central banks are attempting to aid economic recovery by cutting rates and pursuing other accommodative policies. Conversely, there is danger in overweighting countries and regions during periods of expansion and at the cusp of a potential downturn. While there are concerns about the U.S. being late in the credit cycle, one thing that hasn’t changed is the overall strength of the U.S. consumer, says Vaselkiv, which should provide a solid foundation for the U.S. economy for the foreseeable future.

Additional Disclosures
Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

Information has been obtained from sources believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2019, J.P. Morgan Chase & Co. All rights reserved.

Important Information
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of April 2019 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

GLOBAL CAPITAL MARKETS ENVIRONMENT

Major U.S. stock indexes were mixed in March, as volatility picked up following two months of solid stock market gains. Trade negotiations between the U.S. and China once again drove sentiment for much of the month, as optimism that both parties would soon reach a trade agreement increased. The Federal Reserve, which held a policy meeting on March 19–20, kept short‑term interest rates unchanged, as expected, and signaled that it did not expect to increase rates in 2019. This dovish stance helped lift the S&P 500 Index to a five‑month high. However, the general downbeat tone of global economic data, combined with a dovish Fed, sent longer‑term bond yields tumbling. The 10‑year Treasury note yield fell to levels not seen since late 2017, and it slipped below the three‑month Treasury bill yield. Historically, such yield curve inversions have often been an early signal of a recession. However, T. Rowe Price managers observe that extraordinary measures by central banks in recent years to hold down long‑term interest rates may be making the signal less reliable.

Large‑cap shares outperformed mid‑ and small‑caps. The large‑cap S&P 500 Index returned 1.94% versus ‑0.57% for the S&P MidCap 400 Index and ‑2.09% for the small‑cap Russell 2000 Index. As measured by various Russell indexes, growth stocks outperformed value stocks across all market capitalizations.

In the large‑cap universe, as measured by the S&P 500 Index, sector performance was mostly positive. The interest rate‑sensitive real estate sector—which includes real estate investment trusts that often have attractive yields versus stocks in other sectors—performed best, as longer‑term interest rates declined. Information technology stocks fared well, lifted in part by strength in Apple, which announced that it would offer a new video streaming service. Consumer discretionary and consumer staples shares also outperformed the broad market. Industrials and business services stocks declined for the month amid concerns over a global slowdown. The sector was also hurt by a sharp decline in Boeing shares following a second fatal accident involving its new 737 MAX 8 airliner since the end of October 2018. Financials shares performed worst, as the plunge in longer‑term interest rates hurts banks’ ability to make profitable loans.

U.S. Stock Returns
  S&P 500 Index S&P MidCap 400 Index Russell 2000 Index

March

1.94%

-0.57%

-2.09%

Year-to-Date

13.65 14.49 14.58

Past performance is not a reliable indicator of future performance.
Sources: RIMES, as of March 31, 2019; Standard & Poor’s, LSE Group. See Additional Disclosures.

Domestic investment‑grade taxable bonds produced strong returns as longer‑term Treasury yields declined. The Bloomberg Barclays U.S. Aggregate Bond Index returned 1.92%. In the investment‑grade universe, long‑term Treasury and corporate bonds performed best. Mortgage‑backed securities lagged, as falling long‑term rates could lead to increased mortgage prepayments and refinancing activity. Asset‑backed securities underperformed the broad market with mild gains. Tax‑free municipal bonds performed well but trailed the taxable bond market. High yield bonds produced gains but underperformed investment‑grade issues.

Stocks in developed non‑U.S. equity markets yielded slight positive returns but underperformed U.S. large‑cap shares, in part because of a stronger U.S. dollar versus some major currencies. The MSCI EAFE Index, which measures the performance of stocks in Europe, Australasia, and the Far East, returned 0.74%. Developed Asian markets were mixed, with New Zealand shares leading the way, posting returns of over 6%. Japanese shares advanced close to 1% despite disappointing economic news: exports fell for a third consecutive month as indicators of manufacturing sentiment in Japan have declined steeply in recent months, primarily due to weakness in global economic growth. European stock market returns were narrowly mixed, with Belgian and Danish stocks leading the way, returning over 3% each while Austrian shares dropped 3%. Shares in the UK returned roughly 1% amid Brexit uncertainties. The European Union (EU) offered UK Prime Minister Theresa May an extension until April 12 to pass a Brexit plan through Parliament. 

U.S. Bond Returns
  Bloomberg Barclays
U.S. Aggregate Bond
Index

Bloomberg Barclays
Municipal Bond Index

JPMorgan Global
High Yield Index

March

 1.92%

 1.58%

 0.98%

Year-to-Date

 2.94

 2.90

 7.06

Past performance is not a reliable indicator of future performance.
Sources: RIMES, as of March 31, 2019; Bloomberg Index Services Limited, J.P. Morgan. See Additional Disclosures.

Emerging markets stocks performed in line with developed non‑U.S. markets. The MSCI Emerging Markets Index returned 0.86%. Emerging Asian markets were widely mixed. The Chinese A shares market continued its recent rally and surged over 6%, thanks to growing confidence that the Chinese government would continue to step up easing measures to counter China’s slowing economy. In addition, investors welcomed MSCI’s plan to increase China’s representation in some of its indexes later this year. Indian stocks advanced more than 9% amid expectations that Prime Minister Narendra Modi’s ruling coalition would win in the upcoming election. In contrast, South Korea was the worst-performing emerging Asian market and returned roughly ‑3%. Won weakness weighed on market performance in dollar terms.

Non-U.S. Stock Returns
  MSCI EAFE Index MSCI Emerging Markets Index

March

0.74%

0.86%

Year-to-Date

10.13

9.95

Past performance is not a reliable indicator of future performance.
Sources: RIMES, as of March 31, 2019; MSCI. See Additional Disclosures.

In Latin America, shares were widely mixed. Colombia led the region, returning over 4%. Brazilian shares touched record levels in March but dropped almost 4% for the month. Brazilian weakness stemmed from the shocking arrest of former president Michel Temer on corruption charges—a major distraction to the new president’s efforts to convince the legislature to pass his proposed pension reform, which many analysts believe is needed to get government debt under control. Mexican stocks ended the month flat. At the beginning of March, S&P Global Ratings downgraded its outlook for Mexican sovereign debt from “stable” to “negative.” S&P also reduced its outlook on a variety of Mexican corporations, especially banks.

Bonds in developed non‑U.S. markets delivered positive returns, as global growth fears fueled a flight into government bonds. Gains were trimmed, however, by a stronger U.S. dollar against some currencies. For example, in the UK, bond yields declined, and prices rose due to Brexit uncertainty and the dimming economic outlook, but the British pound fell about 2% versus the greenback. In the eurozone, bond yields declined as the European Central Bank pushed out the timing of interest rate hikes until 2020 at the earliest and announced a new round of targeted longer-term refinancing operations (TLTROs) to encourage bank lending to help stimulate the economy. The euro slid more than 1% versus the U.S. dollar. In Japan, 10‑year government bond yields slipped deeper into negative territory as the Bank of Japan maintained its highly accommodative monetary policy.

Emerging markets bonds were mixed. Dollar‑denominated debt appreciated, but local currency issues declined. Most emerging markets currencies weakened versus the dollar, especially the South African rand, the Turkish lira, the Argentine peso, and the Brazilian real. The Indian rupee―which was aided by robust foreign inflows―was an exception, rising more than 2%.

Non-U.S. Bond Returns
  Bloomberg Barclays
Global Aggregate
Ex-U.S. Dollar Bond
Index

JPMorgan Emerging
Markets Bond
Index Global
Diversified

JPMorgan GBI-EM
Global Diversified
Index

March

0.71%

1.42%

-1.33%

Year-to-Date

1.52

6.95

2.92

Past performance is not a reliable indicator of future performance.
Sources: RIMES, as of March 31, 2019; Bloomberg Index Services Limited, J.P. Morgan. See Additional Disclosures.

Additional Disclosures
Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

Information has been obtained from sources believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2019, J.P. Morgan Chase & Co. All rights reserved.

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MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

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Important Information
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of April 2019 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

Emerging markets stocks rose for the third straight month in March as central banks worldwide left their borrowing rates unchanged, giving investors impetus to buy higher‑risk overseas assets. Emerging markets assets also got a boost after the Federal Reserve’s March policy meeting, when officials left the fed funds rate unchanged and forecast no rate increases this year. The Fed’s unexpected dovish tilt reassured investors that foreign capital would continue to flow into the developing world. Optimism about a U.S.‑China trade deal helped sentiment as talks continued and both countries inched closer to an agreement. Despite deep differences in some areas, U.S. and Chinese officials are reportedly keen to broker a deal by the end of April to head off an escalation in their trade battle. Seven sectors rose and four declined in the MSCI Emerging Markets Index. Real estate stocks performed the best, while industrials and business services stocks fell the most.

Total Returns
MSCI Index March Year-to-Date
Emerging Markets (EM)  0.86%  9.95%
EM Asia  1.83  11.13
EM Europe, Middle East, and Africa (EMEA) -1.31  5.60
EM Latin America -2.51  7.94

Past performance is not a reliable indicator of future performance.
All data are in U.S. dollars as of March 31, 2019. This table is shown for illustrative purposes only and does not represent the performance of any specific security.
Source: MSCI. See Additional Disclosures.

Chinese Stocks Rise On Trade War Resolution Hopes; Indian Stocks Rally On Preelection Buying

  • U.S. dollar-denominated Chinese stocks and yuan‑denominated A shares rose amid hopes for a resolution to the U.S.‑China trade standoff and Beijing’s assurances to support the economy at the annual National People’s Congress meeting. China lowered its annual growth target to between 6.0% and 6.5%, down from last year’s 6.6% expansion, as most indicators showed its economy continued to slow.
  • Indian stocks rallied more than 9% as military tensions with Pakistan eased and speculation rose that the ruling coalition led by Prime Minister Narendra Modi would win reelection in May by a sizable margin, raising expectations that the government would spur investment in sectors such as construction and infrastructure.
  • Southeast Asian stock markets were mixed: Stocks advanced in Indonesia and the Philippines but declined in Malaysia and Thailand. Central banks in Indonesia and the Philippines left their benchmark interest rates unchanged at 4.75% and 6.0%, respectively, as the Fed’s pause gave them scope to stay on hold for longer and possibly cut rates in the coming months. Thailand’s central bank also kept its key rate unchanged but cut its 2019 growth forecast for the second time in three months, to 3.8% from a prior 4.0% estimate. 

Brazilian Stocks Decline As Economic Data Underwhelm; Mexican Stocks Edge Up

  • Brazilian stocks shed nearly 4%. Brazil’s central bank cut its 2019 economic growth forecast to 2.0% from a 2.4% estimate in December after recent indicators showed the country’s recovery from the 2015–2016 recession was losing steam. Earlier in the month, the central bank kept its benchmark Selic interest rate at a record low 6.5% for the eighth straight meeting and signaled that rate cuts were a possibility.
  • Mexican stocks edged higher. Mexico’s central bank left its key rate unchanged at 8.25% as it cited credit risks related to state oil company Pemex and the government. Earlier in March, Fitch Ratings slashed its 2019 economic growth forecast for Mexico to 1.6% from 2.1% and S&P Global Ratings lowered its outlook for the country’s sovereign debt to negative from stable. Both agencies cited policy changes under President Andrés Manuel López Obrador, who took office in December.
  • Andean stock markets were mixed: Stocks in Chile declined but advanced in Colombia and Peru. Central banks in all three countries kept their respective benchmark rates on hold as inflation stayed tame. 

Turkish Stocks Slump On Currency Weakness; Russian Stocks Advance With Oil Prices

  • Turkish stocks sank nearly 15% and the lira lost 5.6% versus the U.S. dollar. Turkish assets slumped at month‑end after data showing an unexpected fall in Turkey’s cash reserves raised suspicions that the central bank was using its holdings to prop up the lira ahead of March 31 elections, causing foreign investors to dump the currency. Turkey entered a recession for the first time in a decade in the final quarter of 2018, when its economy shrank for the second straight quarter.
  • Russian stocks edged up nearly 1%, lifted by rising oil prices. Prices for Brent crude oil, the global benchmark, climbed 27% in the year’s first quarter amid efforts by major exporters to restrict supply. Russia’s central bank left its benchmark interest rate at 7.75% for the second straight meeting but hinted that rate cuts were possible as a stronger ruble and weak consumer demand helped dampen inflation.
  • South African stocks shed almost 2%. The country’s central bank left its key rate unchanged at 6.75% as expected, but cut its 2019 economic growth forecast to 1.3% from 1.7% in January due to the impact of a nationwide electricity crisis centered on Eskom, the cash‑strapped state utility. South Africa received welcome news at month‑end when Moody’s said it would not update its investment‑grade rating on the country’s sovereign debt or outlook, relieving concerns that the Moody’s review would result in a ratings downgrade. 

Solid Fundamentals In Emerging Markets Offset Near‑Term Risks

We are optimistic about the longer‑term outlook for emerging markets. Most developing countries have smaller current account deficits, larger foreign exchange reserves, and more flexible currencies than they did in previous decades, reducing the risk of a financial crisis. Compared with developed markets, most emerging markets have more attractive demographics and a stronger tailwind from rising consumption. Corporate earnings in emerging markets have recovered after years of disappointing performance, and stocks in the asset class are attractively valued versus their developed market peers. Near‑term headwinds include an escalation in global trade tensions and uneven global economic growth. However, we believe that careful stock selection remains the key driver of good returns over time as emerging markets continue to show wide dispersion in the performance of individual countries and companies. 

Additional Disclosures
MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

Important Information
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action. The views contained herein are those of the authors as of April 2019 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

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