Stocks bounced back in February after declining to start the year. U.S. stocks enjoyed their best month since October 2011 and more than made up for the losses incurred in January. Bonds followed their best month in six years with declines in February as interest rates moved higher, but like stocks, they remain positive for the year as well.
In last month’s letter, we discussed how the defensive sectors of the stock market performed well in January. A persistence of this trend would be troubling as the strong relative performance of defensive sectors over more cyclical sectors is one of the conditions that often arise prior to a bear market. However, that condition proved transitory as cyclical sectors led the charge in February. In fact, the utilities sector, which is among the most defensive areas of the stock market, was the only sector to decline…
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