Following a weak start to the year, markets have posted strong returns last month. Gains have come on the back of two major factors, a decline in rate hike fears and resurgence in oil prices. Stocks gained again on the first trading day of the month, raising hopes of better times ahead.
However, concerns continue to linger just beneath the surface, even though they are being ignored at this point in time. This is why it is necessary to pick stocks from stolid, safe sectors which may look boring but provide resilience if volatility recurs.
Strong March Performance
An increase in oil prices was one of the major reasons for last month's remarkable performance. Rising possibilities of a production freeze, a weaker-than-expected rise in crude inventories and a decline in the oil rig count played major roles in boosting oil prices.
Meanwhile, the Federal Open Market Committee (FOMC) decided to keep interest rates flat at between 0.25% and 0.50% and its new forecast reduced the number of rate hikes likely this year from four to two. Data on job additions and GDP also remained promising.
Oil, Economic Worries Persist
However, familiar concerns continue to persist beneath the surface. The FOMC also mentioned last month that “global and financial developments continue to pose risks,” which was one of the primary reasons why it did not hike rates. Additionally, the committee reduced its forecast for economic growth and offered an inflation rate outlook for this year which was weaker than that expected earlier.
Meanwhile, the future of an agreement on a possible oil production freeze among major producers continues to remain tenuous. WTI and Brent Crude have lost 7% and 3% last week. Meanwhile, an important member of Saudi Arabia's oil family said last Friday that it will freeze production only if other large producers, including Iran also do so.
Additionally, dismal manufacturing data emerged from Japan. U.S. economic data continued to remain mixed in nature. While employment and manufacturing reports showed gains, construction spending and auto sales data were disappointing.
