In this quarter's CIO commentary, we discuss tax cuts, international equity outperformance, the flattening yield curve, full employment, and the disappearance of the economic output gap.
After a sharp contraction in the third quarter, developed equity markets rebounded strongly in the final quarter of 2015. U.S. equity markets led most regions in the fourth quarter, despite selling off more mildly in the previous quarter. Emerging market equities followed up its dreadful 18% third quarter decline with lackluster performance in the fourth quarter. Aggressive government stimulus and minor currency depreciation ameliorated concerns of a hard landing in the Chinese economy, driving the Shanghai Composite Index up 16% during the quarter. Fixed income sold off modestly.