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Positive earnings results and optimism regarding improving global economic outlooks continued to drive stocks higher. Meanwhile, current economic data remained mixed, which, combined with weak inflation and continued political wrangling in the U.S., helped support bond market gains.
Upbeat corporate earnings reports combined with improving economic growth outlooks and consumer and business confidence helped extend the broad stock market rally. Stocks in the U.S. continued to climb even as President Trump's pro-growth policy agenda remained stalled and the Federal Reserve (Fed) raised interest rates another 25 basis points. These factors largely took a back seat to earnings news released during the quarter. Specifically, the S&P 500® Index logged double-digit first-quarter earnings growth, and most index companies reported better-than-expected earnings results. Stocks retreated late in June, as declining oil prices, U.S. political uncertainty, and the possibility of less-accommodative monetary policy in Europe dampened investor sentiment. Nevertheless, the broad market (S&P 500 Index) returned +3.09% to post its seventh-consecutive quarterly gain.
Non-U.S. stock performance was even more robust, as non-U.S. developed market stocks (MSCI EAFE Index) gained +6.12% and emerging markets (EM) stocks (MSCI Emerging Markets Index) rallied +6.27%. Europe was a key driver of EAFE performance, as strong corporate profits and improving economic fundamentals drove gains for most European markets. In addition, continued central bank stimulus and the victory of centrist candidate Emmanuel Macron in France's presidential election lifted investor sentiment. Stocks in Japan also advanced, largely supported by export growth. Meanwhile, steady capital flows, the ongoing global economic recovery, and generally positive earnings growth in key markets drove EM gains. Similar to U.S. stocks, non-U.S. stocks lost some ground late in the quarter on falling oil prices and some hawkish comments from central bank policymakers in Europe.
U.S. bonds generally extended their first-quarter gains, advancing +1.45% (Bloomberg Barclays U.S. Aggregate Bond Index). Mixed economic data, continued delays for several of President Trump's growth-oriented policies, and weaker inflation helped support broad bond market gains. Investment-grade bonds were top performers, benefiting from the favorable earnings backdrop and investor demand for yield. Global bond yields were mixed, but returns were generally positive. U.S. dollar weakness helped boost non-U.S. bond returns for unhedged investors.
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The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
Generally, as interest rates rise, the value of the securities held in the fund will decline. The opposite is true when interest rates decline.
International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks.
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Source: MSCI. Morgan Stanley Capital International (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 to create indices or financial products. This report is not approved or produced by MSCI.
Source: Bloomberg Index Services Ltd
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