Market Commentary – 4/15/16

There was not much to report on the economic front this past week with most of the reporting focused on inflation. Inflation remains tame as evidenced by the Consumer Price Index (CPI) report released this past Thursday. The March Consumer Price Index (CPI) rose 0.1%, below the 0.3% expected. The Core rate, which strips out volatile food and energy, also rose by 0.1%, below the 0.2% estimated. Gas prices were higher last month, offset by lower costs for clothing, furniture and used cars, while the cost for housing, medical care, and cigarettes edged higher. Stocks continue to trade well and have gained back all of their losses from the beginning of the year.

The unintended consequences of negative interest rates have been front page news with the German 10-year bund reaching zero yield. Negative interest rates are challenging for pension funds and insurance companies. The inability to return adequate returns is forcing some European insurance companies to raise additional capital. Where this all leads to should be interesting as the prospect of negative rates is real and will force investors into buying riskier assets.

Here in the U.S., interest rates remain at historical lows. However, even given the higher yields in the U.S. versus countries such Germany or Japan, and the potential for our interest rates to go lower, we remain biased toward locking in interest rates at these low levels.