Third Quarter 2014 – “Mixed Messages”
In the third-quarter, U.S. large-cap equities posted modest gains of 1.1%, while small-cap equities and high yield declined by 7.4% and 1.9%, respectively. Positive news regarding employment and manufacturing continued to paint a picture of an improving domestic economy. Investors generally ignored geopolitical events, such as the conflict in the Ukraine and the ￼￼￼spread of ISIS in Iraq, and seemed more concerned that improving economic trends, especially increased strength in the labor market, would force the Federal Reserve to raise rates. Concerns about rising interest rates pushed investors out of the riskier areas of the market; however, their willingness to own risky assets didn’t completely dissipate. Alibaba, a Chinese internet-based e-commerce company, completed the largest Global IPO ever, raising $25 billion; it is now one of the twenty largest companies in the world. This IPO was oversubscribed, despite its complex ownership and corporate governance structure, and closed up 38% on its first day of trading.