Despite big first-quarter rally, stocks still lag other assets in making up lost ground

The stock market came roaring back in the first three months of the year, with the S&P 500 index scoring its biggest first-quarter gain since 1998, but global equities continue to lag haven assets when it comes to making up ground lost in the final three months of 2018, noted analysts at asset-management firm DWS.They highlighted the chart below in a Monday note:

Stocks fell sharply in the final three months of 2018, with the S&P 500 logging a 14% quarterly fall. The S&P 500 ended Friday 3.3% below its all-time closing high of 2,930.75 set on Sept. 20. Despite a brief hiccup on March 22, U.S. stocks maintained their composure as a closely watched measure of the yield curve — the spread between 10-year Treasury note TMUBMUSD10Y, +3.50% and 3-month Treasury bill TMUBMUSD03M, +0.00% yields briefly turned negative, triggering recession fears. More generally, falling Treasury yields at the long end of the curve have contributed to a quarter-long debate over a seeming disconnect between pessimistic bond investors and upbeat equity investors.

Indeed, the DWS analysts noted that haven investments, like sovereign bonds, were the top performers after a strong run in the fourth quarter, producing positive returns in excess of pure coupon income. While gold GCM9, -0.28% retreated from its February peak near $1,348 an ounce, it’s still the best-performing asset on DWS’s radar over the two-quarter period after rising strongly in late 2018.

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