Markets & Economy

Monthly Market Review

April 2019
T. Rowe Price

Stocks recorded solid gains in April, continuing their strong start to the year. The S&P 500 and Nasdaq Composite Indexes hit new all‑time highs at the end of the month, while the other major benchmarks remained modestly below the peaks they established in the fall of 2018. Trading volumes were generally muted despite the release of many first‑quarter earnings reports. Volatility was also notably subdued, with the Cboe Volatility Index (VIX) touching its lowest level in six months.

Sector performance varied widely. Within the S&P 500 Index, financial shares rose 9% on a total return basis, helped by better‑than‑expected earnings results from J.P. Morgan Chase. Communication services shares were also strong, lifted by an earnings beat from Facebook and enthusiasm over Walt Disney’s plans for a new video streaming service. A rise in Microsoft shares helped drive strong gains in technology stocks and propelled the company past USD 1 trillion in market capitalization for the first time—a threshold matched only briefly by Apple and Amazon.com. Health care shares fell nearly 3%, with insurer stocks dragged lower by fears over seeming momentum for a change to a single‑payer system. 

Recession Fears Abate

Renewed confidence in the global economy seemed to be a primary factor boosting sentiment in April. The S&P 500 Index had its best and biggest daily move of the month on April 1, following news of a resurgence in the ailing Chinese manufacturing sector—often viewed as a barometer of global economic conditions. Investors were also encouraged by favorable gauges of U.S. manufacturing and service sector activity. Rising oil prices throughout much of the month seemed to reflect healthy global demand, although the Trump administration’s decision to stop granting sanctions waivers for Iranian oil imports also played a role.

April’s labor market data were especially strong. March payrolls rose more than expected, February’s disappointing print was revised higher, and weekly jobless claims reached new five‑decade lows. Wage growth slowed a bit during March, but the month saw a sharp rise in retail sales. Moreover, consumers appeared to be buying more without paying higher prices. While the Federal Reserve’s preferred inflation measure, the core (less food and energy) personal consumer expenditures price index, moderated somewhat in March, actual personal consumption expenditures rose at their fastest pace in nearly a decade. Not surprisingly, gauges of consumer confidence remained just below cycle highs.

U.S. Indexes
Total Returns

 

April

Year-to-Date

Dow Jones Industrial Average

2.66%

14.79%

S&P 500 Index

4.05 18.25

Nasdaq Composite Index

4.74

22.01

S&P MidCap 400 Index

4.02

19.09

Russell 2000 Index

3.40

18.48

Past performance is not a reliable indicator of future performance.
Note: Returns are for the periods ended April 30, 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.

Hopes Grow That Trade Deal Is Near

Investors also appeared encouraged by a more stable policy environment. Early in the month, President Donald Trump announced that the U.S. and China were nearing an “epic” trade deal. While no deal materialized by the end of April, high‑level talks continued, and President Trump stated near the end of the month that Chinese President Xi Jinping would soon visit Washington, presumably to sign an agreement. Investors may have also been relieved by the European Union’s decision to grant the British government a six‑month extension to develop a new Brexit plan.

Reports released by the end of April indicated a modest overall decline in large-company earnings in the first quarter, but investors seemed pleased that companies were mostly able to hold on to the surge in profits they had enjoyed in 2018. As of April 26, FactSet was estimating that overall earnings for the S&P 500 had declined by 2.3% versus the year before, held down in part by higher labor costs. Revenues were expected to have grown by a little over 5%, however, and analysts polled by FactSet expected earnings growth to resume at a moderate pace later in the year.

Expansion Is Likely To Continue, But Its Benefits May Become More Concentrated

While the expansion appears poised to enter a record 11th year in July, the recovery from the financial crisis has been an exceptionally slow one that has restrained the “animal spirits” of both consumers and investors. The absence of any late‑cycle excesses—as exemplified by the latter stages of the dot‑com boom of the 1990s and the housing boom of the next decade—makes us optimistic that the current expansion has room to run. Nevertheless, as the impact of the December 2017 tax cuts on year‑over‑year earnings comparisons rolls off and fiscal stimulus wanes, earnings growth should be harder to come by and thus concentrated in fewer companies. This could favor an active approach to investing, along with careful fundamental research to identify firms able to leverage competitive advantages and prosper in a more challenging environment.

Additional Disclosures
FactSet. Copyright 2019 FactSet. All Rights Reserved.

J.P. Morgan. 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.

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 May 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 in April but underperformed U.S. shares as trade tensions eased and oil prices continued to rise. Dovish signals from central banks also helped stocks move higher despite headwinds from worries about slowing global growth and geopolitical tensions.

The MSCI EAFE Index, which measures the performance of stocks in Europe, Australasia, and the Far East, returned 2.91%. Within the MSCI EAFE Index, eight of the 11 sectors rose, led by information technology and financials. Real estate, health care, and utilities declined. Growth stocks in the EAFE index gained 3.38%, outperforming value shares, which returned 2.42%. Emerging equity markets rose, led by gains in the emerging Europe, Middle East, and Africa (EMEA) region. Stocks in Latin America underperformed other regions, rising a mere 0.46%, as measured by the MSCI EM Latin America Index.

European Stocks Rise Despite Pressure From Slow Growth And Political Uncertainties

European equities advanced in April, despite signs of widespread economic weakness across the eurozone. T. Rowe Price traders said that better‑than‑expected earnings and dovish central banks have helped European equities trade higher. T. Rowe Price Equity Trader Richard Pinnington noted that markets are beginning to believe that European economies may have bottomed out, especially in light of better Chinese economic data. A rotation out of U.S. stock markets, as they reach or flirt with all‑time highs, has also boosted Europe’s attractiveness, as has a stronger U.S. dollar versus the euro, which could benefit European exporters.

The bottoming out was not apparent in April’s economic reports, however. Purchasing managers’ reports indicated that European economic activity remained in its most sluggish state since 2014. The euro fell to a two‑year low against the U.S. dollar amid the weakness, which was broad‑based, as manufacturing activity and service sector growth slowed. Adding to these concerns, Germany’s Ifo Institute reported that its business climate indicator in April fell for the seventh month out of the last eight, highlighting the difficulties that the trade‑dependent German economy is facing as global growth slows, political worries mount, and confidence declines. That report came after the German government slashed its 2019 growth forecast to 0.5% from an earlier 1.0%.

The British pound was little changed versus the U.S. dollar for the month, as the European Union gave the UK until October 31—a six‑month extension—to finalize a Brexit agreement. T. Rowe Price Fixed Income Portfolio Manager Quentin Fitzsimmons said that the compromise extension highlighted growing divisions among European leaders about how much time the UK should be given to finalize its exit agreement. Going forward, he will watch the progress of cross‑party talks in the UK. As it stands now, he puts the chances of a “hard” Brexit (i.e., one without a formal agreement with the EU) by October 31 at 25% and the odds that a further extension is granted at 75%. Fitzsimmons noted that, in his opinion, it is hard to see how this deal will do anything to lift business optimism and could leave many investors sidelined. Indeed, the uncertainty leaves questions for trade relationships and corporate earnings. 

International Indexes
Total Returns

MSCI Indexes

April

Year-to-Date

EAFE (Europe, Australasia, Far East)

2.91%

13.33%

All Country World ex-U.S.A.

2.72

13.44

Europe

3.73

15.14

Japan

1.39

8.33

All Country Asia ex-Japan

1.91

13.58

EM (Emerging Markets)

2.12

12.29

Past performance is not a reliable indicator of future performance.
All data are in U.S. dollars and represent gross returns as of April 30, 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 Fourth Consecutive Month

Japanese stocks gained in April for the fourth month in a row, as geopolitical risks receded, and the yen weakened slightly against the U.S. dollar, which is a benefit to Japanese exporters. The gains came even as concerns over U.S.‑China trade negotiations continued to feed through to economic data. The widely watched Tankan index of large manufacturers had its worst reading in two years.

Japan’s Exports Hit By Slowing Growth And Trade Tensions

The Japanese economy and Japanese companies have come under pressure from a slowing in China’s economy and the U.S.‑China trade dispute, which have particularly hurt the country’s export sector. In mid‑April, the Ministry of Finance reported that Japanese exports fell for a fourth consecutive month in March, which has added to the worries that the economy may fall back into recession because of weak external demand. 

Emerging Markets Rise But Underperform Developed Markets

Emerging markets stocks rose but underperformed developed markets as dovish central banks opened the way for renewed investor risk sentiment. The MSCI Emerging Markets Index returned 2.12%, led by solid gains in the EMEA region and Asia. Chinese stocks advanced more than 2% while Chinese A shares gained 0.23%. Latin American markets generally declined, dragged lower as weakness in Argentina spilled into other regional markets. Mexico was the outlier, however, rising more than 5% as the peso gained about 2% against the U.S. dollar, thanks to rising oil prices. 

South Africa Paces The EMEA Region

The MSCI EM Europe, Middle East and Africa Index gained 2.98% in April, propelled by an 8% gain in South African equity markets, which benefited from expectations that the ruling African National Congress would win the country’s general elections in May and give President Cyril Ramaphosa the mandate needed to carry out market‑friendly reforms. Russian stocks also gained in April, buoyed by higher oil prices. Turkish stocks fell nearly 4% and the currency sank more than 5% as volatility in the country’s reserves and an unexpectedly dovish turn by its central bank raised alarm in investors. 

Outlook: Global Growth Expected To Moderate, But Bottom May Be In Sight

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. Trade‑driven economies, including Germany, may be the hardest hit going forward. A continuation of trade tensions could exacerbate this slowdown, especially if tensions spread to Europe as well, while Chinese monetary and fiscal stimuli have the greatest potential to drive global growth higher. However, recent U.S. and eurozone data have surprised to the upside, while the reduction in the probability of a disorderly hard Brexit and Italy’s escape from recession will support sentiment and consumer confidence going forward. 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 May 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.

Treasury yields rose in April as generally strong economic news led investors to favor riskier areas of the fixed income market over safe‑haven U.S. government debt. The yield of the benchmark 10‑year Treasury note started April near a 15‑month low of 2.41% and rose as high as 2.60% before finishing the month at 2.51%. (Bond yields and prices move in opposite directions.) 

Stronger Economic News Helps Drive Treasury Yields Higher

A brief inversion of the three‑month/10‑year portion of the yield curve in March had sparked recession fears. However, yields of longer‑maturity Treasuries increased more than shorter‑maturity yields as sentiment turned more bullish in April, leading to a steepening of most portions of the yield curve.

Continued signs of strength in the U.S. job market—weekly jobless claims fell to the lowest level since 1969—as well as stronger‑than‑expected economic reports from China helped reinforce investor sentiment in April. In addition, March retail sales bounced back more than expected from a small February decline, and first‑quarter gross domestic product grew at a faster‑than‑expected pace of 3.2%, although the report also showed that consumer spending had slowed.

Treasury inflation‑protected securities outperformed nominal Treasuries as 10‑year breakevens—a market‑based measure of inflation expectations—rose to their highest level since November 2018, but most inflation measures remained subdued. The consumer price index increased 1.9% on a year‑over‑year basis in March, up from 1.5% in February. The Federal Reserve’s preferred inflation measure, the core PCE price index, which excludes food and energy, rose 1.6% and remained below the central bank’s 2% target. The minutes from the Fed’s March policy meeting acknowledged that it was “noteworthy” that the tight labor market had not produced higher inflation.

Total Returns

Index

April

Year-to-Date

 

Bloomberg Barclays U.S. Aggregate Bond Index

 0.03%

 2.97%

 

J.P. Morgan Global High Yield Index

 1.40

 8.56

 

Bloomberg Barclays Municipal Bond Index

 0.38

 3.28

 

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

 -0.61

 0.90

 

J.P. Morgan Emerging Markets Bond Index Global Diversified

 0.24

 7.21

 

Bloomberg Barclays U.S. Mortgage Backed Securities Index

 -0.06

 2.11

 

Past performance is not a reliable indicator of future performance.
Figures as of April 30, 2019. This table is shown for illustrative purposes only and does not represent the performance of any specific security.
Sources: RIMES, as of April 30, 2019; Bloomberg Index Services Limited, J.P. Morgan. See Additional Disclosures.

Investment‑Grade Corporate Bonds Record Solid Gains

The U.S. taxable investment‑grade bond market produced overall flat results as the downturn in Treasury prices was offset by solid gains from investment‑grade corporates, which were supported by inflows, manageable new issuance, and generally positive economic news during the month. The rally in U.S. stocks also helped drive positive returns. In credit‑specific news, Ford Motor reported stronger‑than‑expected first‑quarter results, leading to a rally in the automaker’s bonds. Mortgage‑backed securities recorded modest losses.

U.S. Treasury Yields

Maturity

March 31

April 30

3-Month

2.40%

2.43%

6-Month

2.44

2.46

2-Year

2.27

2.27

5-Year

2.23

2.28

10-Year

2.41

2.51

30-Year 2.81 2.93

Source: Federal Reserve Board.

High Yield Bonds Continue Rally

High yield bonds, which have gained 8.56% through the first four months of the year, continued to generate solid gains and outperformed most areas of the fixed income universe in April. Solid demand, a light new issuance calendar, and generally positive corporate earnings reports were key factors in lifting high yield debt. High yield energy bonds benefited as recent merger news led to speculation that higher‑quality below investment‑grade names could be acquisition targets by large investment‑grade companies. The high yield retail segment also performed well. Floating rate loans rebounded from March losses and produced strong returns. 

Demand for Munis Remains Strong

Municipal bonds recorded positive results and outperformed Treasuries. Demand for tax‑free bonds remained strong while new issuance levels were below historical averages. High yield munis outperformed their investment‑grade counterparts, led by strong results from Puerto Rico debt. However, high yield tobacco bonds lost ground amid the possibility of new regulations, including a proposal to make 21 the legal age to buy cigarettes nationwide. 

Developed Market Central Banks Make Accommodative Moves

Non‑U.S. developed market bonds delivered negative returns and underperformed most other fixed income segments for the month as currency weakness weighed on returns. Central bank actions were generally accommodative: The Bank of Canada removed a reference about future rate hikes from its policy meeting statement, while the Bank of Japan said it did not intend to raise rates until 2020 as a result of global economic uncertainties and the effects of the country’s upcoming consumption tax increase. Ten‑year sovereign bond yields rose in Japan, the UK, and Germany, where the bund’s yield climbed out of negative territory. 

Emerging Markets Bonds See Record Inflows

Strong demand drove positive results in emerging markets bonds as money flowed into the asset class at a record pace. Emerging markets benefited from more accommodative central bank policies globally and a general risk‑on environment, although headlines within the sector during April were uninspiring. Argentina bonds sold off as polling data indicated an increasing chance of former president Cristina Kirchner returning to office, which many investors believe could lead to a sovereign default. Meanwhile, oil company Saudi Aramco, which is owned by the Saudi government, brought USD 12 billion of debt to market in one of the month’s largest bond deals. The bonds saw very strong demand but traded poorly after the initial offering. (Although based in an emerging market, Saudi Aramco is widely considered an investment‑grade corporate issuer in the fixed income market.)

Outlook: Emerging Markets May Provide Defensive Opportunities

Although emerging markets (EM) bonds have produced strong results through the first four months of 2019, T. Rowe Price fixed income portfolio specialist Ben Robins continues to see opportunities in the asset class. He notes that many EM regions and sectors offer defensive opportunities that can potentially outperform other asset classes during periods of risk aversion. He believes that EM corporates stand out as a defensive sector due to their strong fundamentals. For example, Asia credit, which has grown substantially in recent years, has performed more in line with developed market investment‑grade debt than other higher‑volatility EM sectors. Robins says the defensive sectors of EM also offer opportunities to diversify portfolios away from developed market regions with the most concerning growth outlooks and large debt accumulations.

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 May 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 produced positive returns in April, as trading volumes and volatility hit new lows for the year. Stocks benefited from solid U.S. economic data: For example, the Labor Department reported early in the month that 196,000 jobs were added in March, surpassing expectations. Also, weekly jobless claims fell to lows not seen since 1969. In addition, the Commerce Department released its initial estimate of first‑quarter gross domestic product (GDP) at the end of April, which was surprisingly strong. The U.S. economy grew at a 3.2% annualized pace, baffling many observers who expected slower growth due to the partial federal government shutdown for much of January and severe winter weather across much of the country. Trade negotiations between the U.S. and China were once again a primary driver of sentiment for much of the month, as investors remained optimistic that both parties would soon reach an agreement. President Donald Trump hinted in early April that an “epic” trade deal could be reached in as early as four weeks.

Large‑ and mid‑cap shares slightly outperformed small‑caps. The large‑cap S&P 500 Index and the S&P MidCap 400 Index returned 4.05% and 4.02%, respectively, versus 3.40% for the small‑cap Russell 2000 Index. As measured by various Russell indexes, growth stocks outperformed value stocks among large‑ and mid‑cap shares, while value outperformed growth in small‑caps.

In the large‑cap universe, as measured by the S&P 500 Index, sector performance was mostly positive. Financial shares performed best as a few large banks reported stronger‑than‑expected first‑quarter corporate earnings. Also, longer‑term Treasury yields rebounded somewhat from late‑March lows―which bodes well for banks’ lending margins. Communication services stocks also gained and outperformed the broad index. Information technology shares performed well, as bellwether Microsoft released strong quarterly earnings, lifting its market capitalization briefly over USD 1 trillion. Conversely, health care stocks declined as political rhetoric caused investors to worry about the potential for greater government regulation of health care, particularly after the November 2020 elections, which could hurt corporate profits in the sector. In a televised town hall appearance, for example, Democratic presidential candidate Senator Bernie Sanders proposed a government‑run “Medicare for All” system. The interest rate‑sensitive real estate sector—which includes real estate investment trusts that often have attractive yields versus stocks in other sectors—also fell slightly, as longer‑term rates increased.

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

April

4.05%

4.02%

3.40%

Year-to-Date

18.25 19.09 18.48

Past performance is not a reliable indicator of future performance.
Sources: RIMES, as of April 30, 2019; Standard & Poor’s, LSE Group. See Additional Disclosures.

Domestic investment‑grade taxable bonds produced mostly flat returns as longer‑term Treasury yields increased. The Bloomberg Barclays U.S. Aggregate Bond Index returned 0.03%. In the investment‑grade universe, corporate bonds performed best—albeit with modest gains. Asset‑backed securities edged higher, whereas mortgage‑backed securities were essentially flat. Long‑term Treasuries fell slightly. Tax‑free municipal bonds appreciated modestly and outperformed the taxable bond market. High yield bonds gained and outperformed high‑quality issues, thanks to solid demand, light new issuance, and generally positive corporate earnings reports. Rising oil prices also continued to benefit high yield energy sector bonds.

Stocks in developed non‑U.S. equity markets rose but underperformed U.S. shares. The MSCI EAFE Index, which measures the performance of stocks in Europe, Australasia, and the Far East, returned 2.91%. Developed Asian markets were positive, led by Singapore, where shares rose more than 6%. Japanese shares edged higher and returned more than 1% despite uninspiring economic data, such as a decline in core machinery orders and a decrease in exports, particularly to China. European stock market returns were mostly positive, with German and Austrian stocks leading the way, returning almost 7%. Shares in the UK were volatile―as Brexit negotiations continued―and returned over 2%. The European Union (EU) gave the UK a six‑month extension to finalize a Brexit agreement. The new deadline for a Brexit deal is October 31, 2019.

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

Bloomberg Barclays
Municipal Bond Index

JPMorgan Global
High Yield Index

April

 0.03%

 0.38%

 1.40%

Year-to-Date

 2.97

 3.28

 8.56

Past performance is not a reliable indicator of future performance.
Sources: RIMES, as of April 30, 2019; Bloomberg Index Services Limited, J.P. Morgan. See Additional Disclosures.

Emerging markets stocks posted positive returns but underperformed developed markets. The MSCI Emerging Markets Index returned 2.12%. Emerging Asian markets were mostly positive, led by Taiwan, which returned nearly 4%. Chinese shares rose more than 2%, as a late‑month sell‑off pared earlier gains. Data released during the month showed that China’s first‑quarter GDP grew 6.4% from the prior-year period―more than anticipated―which alleviated concerns that trade tensions with the U.S. were weighing on the economy. Stocks were initially boosted by the news, but fears that Beijing would dial back policy support prompted the largest decline in Chinese assets since 2018.

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

April

2.91%

2.12%

Year-to-Date

13.33

12.29

Past performance is not a reliable indicator of future performance.
Sources: RIMES, as of April 30, 2019; MSCI. See Additional Disclosures.

In emerging Europe, Russian shares performed well and returned nearly 4%, thanks in large part to rising oil prices. Turkish shares were extremely volatile during the month and declined roughly 4%, coming under pressure from rising oil prices, as Turkey is one of the largest oil importers in the world. A political controversy also pressured Turkey during the month, as President Recep Tayyip Erdogan’s ruling AK Party rejected recent municipal elections in Istanbul―won by an opposing party―and is attempting to have the election nullified because of alleged irregularities. There was also concern about the Turkish central bank’s commitment to fighting elevated inflation, as suggested by a wording change in its most recent post‑meeting statement.

In Latin America, shares were mostly negative. Mexico was the main exception in the region, returning over 5%, partially the result of the peso’s roughly 2% gain versus the dollar. Brazilian stocks fell about 1%. However, shares rallied at the end of the month as pension reform finally made it through a constitutional committee in the lower chamber of the legislature. There are still fears that pension reform could be watered down due to President Jair Bolsonaro’s lack of a strong coalition in the legislature. Pension reform is seen as a vital tool to rein in government debt.

Bonds in developed non‑U.S. markets delivered negative returns, due in part to a stronger U.S. dollar against some major currencies. In Europe, 10‑year German bund yields edged higher, while the euro bounced off two‑year lows to end the month little changed against the greenback. In the UK, bond yields increased and prices declined following the EU’s decision to grant the UK a six‑month Brexit extension. The British pound was little changed versus the greenback.

In Japan, 10‑year government bond yields increased slightly but remained in negative territory as the Bank of Japan left interest rates unchanged at its late‑April policy meeting.

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

April

-0.61%

0.24%

-0.18%

Year-to-Date

0.90

7.21

2.74

Past performance is not a reliable indicator of future performance.
Sources: RIMES, as of April 30, 2019; Bloomberg Index Services Limited, J.P. Morgan. See Additional Disclosures.

Emerging markets bonds were narrowly mixed. Dollar‑denominated debt produced slightly positive returns, while local currency issues declined marginally. Most emerging markets currencies weakened versus the dollar, especially the Turkish lira and the South Korean won. The Brazilian real and the Argentine peso also depreciated versus the dollar, but to a lesser extent, while the Mexican peso and Russian ruble strengthened. 

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.

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.

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.

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 May 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 fourth straight month in April as central banks worldwide showed a willingness to keep interest rates at low levels as the global economic outlook darkened. Central banks in Turkey, Russia, Indonesia, and Colombia left their benchmark rates on hold, giving investors impetus to buy riskier overseas assets. The gains in emerging markets stocks came even after the International Monetary Fund (IMF) reduced its global growth forecast to 3.3% this year, down from its 3.5% estimate in January. The IMF cited heightened downside risks for its lowered expectations, including U.S.‑China trade tensions, weaker business confidence, tighter financial conditions, and greater policy uncertainty in many places. Seven sectors rose and four declined in the MSCI Emerging Markets Index. Consumer discretionary stocks performed the best, while utilities stocks declined the most. 

Total Returns
MSCI Index April Year-to-Date
Emerging Markets (EM)  2.12%  12.29%
EM Asia  1.82  13.15
EM Europe, Middle East, and Africa (EMEA)  5.22  11.11
EM Latin America  0.46  8.43

Past performance is not a reliable indicator of future performance.
All data are in U.S. dollars as of April 30, 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 As Economic Data Boost Sentiment; Indian Stocks Advance Ahead Of Poll Results

  • U.S. dollar-denominated Chinese stocks and yuan‑denominated A shares rose amid growing confidence that the U.S. and China were nearing a trade deal. China reported its economy grew a better‑than‑forecast 6.4% in the first quarter from a year ago. The data eased concerns that China was stuck in a deep downturn but highlighted the country’s continued reliance on stimulus‑driven growth.
  • Indian stocks edged up as investors awaited the results of the country’s general election, which ends on May 23. The Reserve Bank of India cut its benchmark interest rate for the second straight month and lowered its inflation forecast for the next six months. However, it reduced its economic growth forecast for the current fiscal year to 7.2% from a prior 7.4% estimate.
  • In Southeast Asia, Indonesian stocks rose as investors appeared to welcome unofficial election results showing that President Joko Widodo won reelection by a comfortable margin, giving him a renewed mandate to pursue his economic agenda. Malaysian stocks declined as an ongoing austerity drive under the country’s new government elected last May dampened the country’s growth outlook. 

Brazilian Stocks Weaken As Traders Await Pension Reform; Mexican Stocks Gain As Oil Prices Rally

  • Brazilian stocks declined as traders watched for signs of progress in lawmakers’ push to overhaul the country’s troubled pension system. At month‑end, Brazil’s lower house of Congress created a special committee to debate changes to a pension reform bill days after voting that the bill itself was constitutional, signaling a new urgency behind a plan seen as essential for stabilizing the country’s finances.
  • Mexican stocks gained over 5% as the peso rebounded on higher oil prices. Mexico’s economy unexpectedly shrank in the first quarter from the prior three months as the manufacturing and services sectors contracted, according to preliminary data. The report marked a setback for President Andrés Manuel López Obrador, who took office in December targeting 4% average annual economic growth during his six‑year term.
  • Andean stock markets weakened, led by a roughly 2% decline in Colombian stocks. Central banks in Colombia and Peru left their benchmark rates unchanged. Chile’s central bank cut its economic growth forecast to 3% to 4% this year, down from a prior 3.25% to 4.25% range, due to weakness in the country’s mining sector.

Turkish Stocks Drop On Currency Sell‑Off; South African Stocks Rally On Expected ANC Win

  • Turkish stocks fell nearly 4% and the currency sank more than 5% as volatility in the country’s reserves and an unexpectedly dovish turn by its central bank raised alarm in investors. Turkey’s central bank left its key interest rate on hold and dropped a pledge to tighten policy if needed, stoking concerns among investors who believe that officials should be hiking rates to fight inflation, which approached 20% in March.
  • Russian stocks rose as prices for crude oil, the country’s chief export, traded above USD 70 per barrel for most of April. Prices for Brent crude, the global benchmark, approached a six‑month high on supply fears after the Trump administration moved to curtail oil imports from Iran. Russia’s central bank left its key rate on hold for the third straight meeting and said that it could reduce rates later this year.
  • South African stocks climbed roughly 8% as traders anticipated that the ruling African National Congress (ANC) would score a sizable victory in the country’s May 8 election, giving President Cyril Ramaphosa a mandate to carry out reforms desired by investors.

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 May 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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