Things are looking up in 2019.
“After a tough end of 2019, cross-asset performance YTD has been strong both for risky and safe assets, indicating a sharp increase in risk appetite,” Goldman Sachs analyst Alessio Rizzi wrote in a note Monday. “Bonds and equities have rallied together this year after both closing in negative territory in 2018.”
Just about every major asset class generated returns that outpaced inflation in the first two months of 2019, according to a note Friday from Morgan Stanley strategist Andrew Sheets.
This represents an about-face from 2018, when nearly every asset class – including both risk and haven investments – posted returns that were negative or little changed.
The marquee S&P 500 (^GSPC) clinched an 11.5% return from January through the end of February, the best two-month start to a year since 1991. But even this decades-high return was eclipsed by returns from REITS (up 12.2%), the small-cap Russell 2000 index (up 16.8%) and the MSCI China (up 14.9%) – latter two of which were among the worst performers in 2018.
Looking at equities, tech has been the best-performing sector in the MSCI ACWI world index in 2019, Sheets said. In February, the trade-weighted U.S. dollar rose marginally, rallying against most G10 currencies excluding the pound sterling. And Brent crude prices, which declined by about 37% in the fourth quarter of 2018, rallied by 22.7% from January through the end of February.
The cross-asset improvement in returns coincides with a marked improvement in sentiment, Sheets said. In February, the CBOE Volatility Index (^VIX) “fear gauge” declined to the lowest level since early October.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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