The majority of the broad domestic and international stock market indexes we track ended the month of February about where they began. This consolidation has continued into March as the market attempts to reconcile higher interest rates with a firm economic and corporate earnings backdrop. Markets are now projecting rate hikes at each of the next two Fed meetings on March 27/28 and May 10. Moreover, market-based interest rates have been moving higher. The 10-year Treasury yield has climbed 40 basis points in the past two months and is testing the upper end of its three-year trading range at 4.75%.
Stocks have been quite resilient in the face of rising interest rates as investors have taken comfort in persistent economic strength in the U.S. and abroad. U.S. GDP growth is projected to be in excess of 4% in the first quarter. Meanwhile, overseas economic growth has continued to surprise on the upside. This is particularly true in Japan, the world