Watching the data with Yellen

Genevieve Signoret

Letter from the President

Market outlook
We’re all watching the data with Janet Yellen. Headline inflation is zero and core inflation has weakened. While jobs are more plentiful, underemployment remains vast. U.S. demand had been gathering strength, but, in February, manufacturing weakened. Greece is almost out of cash, and no deal is visible on the horizon to save it (or the euro area). China is slowing down abruptly. The bond market seems to think, as we do, that the Fed will wait to conduct its first rate hike to some date beyond June, while foreign exchange markets seem to anticipate the opposite. Yellen and her colleagues can only wait and watch the data, alert to an opportunity to move. We in Mexico should not expect the peso to recover until after both the first Fed rate hike and the Banxico (probably instantaneous) response.  Equity may trend sideways meanwhile.

A strategy change coming up
In coming days, we’ll be replacing large-cap U.S. equity with a small-cap fund in our short-term model portfolio[1]. Small-cap stocks have stronger upward momentum right now.


Previous Letters from the President

FOMC minutes confirm my view (2015 02 23)
Revised portfolio strategies (2015 02 01)
2015–2016 Outlook: Low for Long (2015 01 17)
Still bullish on equity, happy with 7–10-year bonds (2015 01 08)

[1] Read descriptions of these portfolios here. Clients receive details on their composition in addition to individualized strategies and portfolio management services. To request more information, please write to

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