5/1/2007: Equities Posted Impressive Gains in April
April was an outstanding month for equities. Investors apparently put more weight on strong earnings growth and continued M&A activity over disappointing economic news. The S&P 500 posted a 4.4% return in April, which was its best return for a month since December 2003. The index is 2.6% above the February 26 close and 5.1% higher year-to-date. With a few exceptions, international markets also performed well in April. The MSCI EAFE index gained 4.4% in dollar terms. Boosted by strong currencies, European equity markets gained 6.5% in US$ (4.1% in local currencies). Japan, on the other hand, declined 1.9% in US$ (-0.8% in yen). One interesting point for the month is that the S&P 500 performed as well as or better than riskier equity asset classes. Since the market began to rebound in 2003, the trend has been for riskier equity asset classes to perform much better than the S&P 500 in positive months for the index. The Russell 2000 index only earned 1.8% for the month, 260 bps less than the S&P 500. The S&P