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January 13, 2017 Article 1 min read
This month we take a closer look at the performance of two major asset categories – equities and bonds – in the quarter just ended, compared with the quarterly results for each over the past 40 years (that’s 160 quarters).

Executive summary 

  • An improving corporate earnings picture and expectations for a more robust economic expansion fueled a rally in domestic equities in December; 2016 calendar year returns for the major U.S. stock indices were up double-digits, with small-caps leading the pack.
  • December was also a positive month for international stocks despite headwinds from a stronger dollar; developed market equities added 3.4 percent, while emerging markets managed a 0.2 percent return.
  • Returns for most fixed income benchmarks were largely flat in December, following November’s selloff, with the exception of the more risk-correlated high-yield bonds, which added 1.8 percent.
  • In a widely anticipated move, the Fed hiked its benchmark interest rate by 25 basis points following the FOMC meeting in December; it also released a new “dot plot” suggesting the possibility of three more hikes in 2017.