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CEF Specialist

A Divergence of CEF Returns in February

Europe's quantitative easing and a strong U.S. dollar lifted the eurozone and Japan, but negative headline news pushed the municipal market lower.

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Despite a tough road ahead, the eurozone fared relatively well last month. Greece's potential exit from the eurozone, though a hot topic, didn't dim the mostly encouraging news out of Europe. On the heels of the European Central Bank's announcement of its next round of quantitative easing, the region reported better-than-expected fourth-quarter GDP growth, with a strengthening U.S. dollar (and weakening euro) helping many European companies post strong earnings results.  SPDR EURO STOXX 50 (FEZ), which tracks the 50 largest eurozone stocks, gained 6.7% in February versus a 5.7% gain for  SPDR S&P 500 (SPY). Japanese stocks also benefited from a stronger dollar as well as from lower oil prices--iShares Japan Large-Cap (ITF) gained more than 6% last month--but concerns over deflation and additional monetary policy measures are likely to keep a lid on near-term results.

Domestically, the stock market continued its upward trend as unemployment ticked lower, though wage growth remained stalled. The strengthening U.S. dollar is likely to thwart at least some future economic growth, however, and investors are watching closely for any signs of weakness.

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Cara Esser does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.