January 2020 - Monthly Market Commentary

January was a fairly weak month for global risk assets, as developed and emerging market equities were mostly lower, the US yield curve flattened and inverted in the middle of the curve, the US dollar strengthened, credit spreads widened, and the oil complex sold off sharply. The month started with the killing of Iranian general Soleimani, and ended with global fears over the coronavirus epidemic. The US and China signed their phase one trade deal, and fourth quarter earnings reports were strong, particularly for the US tech giants. Fourth quarter US GDP grew at 2.1%, and the Federal Reserve kept interest rates unchanged at their January meeting. The US ISM manufacturing activity index fell slightly in December to 47.2, the lowest level since June 2009, signaling continued contraction in the sector, while the nonmanufacturing index rose to 55. US consumer prices rose 0.2% in December, and 2.3% year over year. The US jobs report showed that 145,000 jobs were added in December (the 111th consecutive month of job creation), the unemployment rate held at 3.5%, the labor force participation rate held at 63.2%, average hourly earnings rose 2.9% from a year earlier, and the total labor force hit a record high of 164.5 million, of which 158.8 million were employed.

Developed market equities were mostly lower in January (see page 8), with gains in Australia (+5.1%) and Canada (+1.6%), and the largest losses in Hong Kong (-4.8%), the UK (-3.3%), and France (-2.2%). US small caps underperformed large caps, with the Russell 2000 down 3.2%, and the Russell 1000 up 0.1% (see page 3). Utilities (+6.7%), IT (+4%), and Real Estate (+1.4%) were the best performing sectors; Energy (-11.1%), Materials (-6.2%), and Healthcare (-2.7%) were the worst performing sectors (see page 2). Large cap growth (+2.2%) outperformed large cap value (-2.2%) in January (see page 3). Emerging market equities were mostly lower in January (see page 9), with gains in Mexico (+1.6%), and the biggest losses in the Philippines (-7.7%), China (-4.9%), and Thailand (-4.9%).

In currencies, the USD Index was higher (+1%) in January (see page 10). The Swiss Franc (+0.5%) and Japanese Yen (+0.2%) strengthened against the USD, while the Australian Dollar (-4.7%), Norwegian Krone (-4.6%), and New Zealand Dollar (-4.1%) saw the biggest losses. Emerging market currencies were mostly lower against the USD, with gains in the Indonesian Rupiah (+0.4%) and Mexican Peso (+0.4%), and the biggest losses in the South African Rand (-6.8%), Brazilian Real (-6.1%), and Thai Baht (-4.8%).

The US interest rate curve flattened and inverted in January (see page 12). 10 year rates closed the month at 1.51%, down from 1.92% at December month end. US investment grade and high yield spreads widened (see page 13).

In commodities, the GSCI index moved lower in January (see page 11), with gains in Precious Metals (+3.7%), and losses in Energy (-15%), Livestock (-10.2%), Industrial Metals (-7.1%), and Agriculture (-2.7%). Within individual commodities, Palladium (+16.7%), Cocoa (+9.5%), and Sugar (+9%) saw the biggest gains, while Lean Hogs (-21.9%), Coffee (-20.8%), and Heating Oil (-19.4%) saw the biggest losses. Gold was up 4% in January.

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December 2019 - Monthly Market Commentary

December was a very strong month for global risk assets, as global equities rose, the US yield curve steepened, the US dollar weakened, credit spreads tightened, and the oil complex rallied. The US and China reached a phase one trade deal that is to be signed in January. The Federal Reserve, ECB (at Christine Largarde’s first policy meeting as President), Bank of Japan, and Bank of England kept interest rates unchanged at their respective December meetings. The US ISM manufacturing activity index fell slightly in November, and remained below 50, signaling continued contraction in the sector, while the non-manufacturing index fell to 53.9. US consumer prices rose 0.3% in November, and 2.1% year over year. Manufacturing surveys in China showed improving confidence and demand. The US jobs report showed that 266,000 jobs were added in November (the 110th consecutive month of job creation), the unemployment rate fell to 3.5%, the labor force participation rate ticked lower to 63.2%, average hourly earnings rose 3.1% from a year earlier, and the total labor force hit a record high of 164.4 million, of which 158.6 million were employed.

Developed market equities were mostly higher in December (see page 8), with the biggest gains in Hong Kong (+3.6%), the S&P 500 (+3%), and the UK (+2.7%), and losses in Australia (-2.4%). US small caps performed in line with large caps, with the Russell 2000 and Russell 1000 both up 2.9% (see page 3). Energy (+6%), IT (+4.5%), and Health Care (+3.6%) were the best performing sectors; Industrials (-0.1%), Real Estate (+1.3%), and Communication Services (+2%) were the worst performing sectors (see page 2). Large cap growth (+3%) outperformed large cap value (+2.8%) in December (see page 3). Emerging market equities moved higher in December (see page 9), with the biggest gains in Argentina (+13.2%), China (+7.9%), and Korea (+7.8%).

In currencies, the USD Index was lower (-1.9%) in December (see page 10). The Norwegian Krone (+5.1%), New Zealand Dollar (+5%), and Australian Dollar (+3.8%) strengthened the most against the USD. Emerging market currencies were mostly stronger against the USD, with the biggest gains in the Brazilian Real (+5.4%), South African Rand (+4.7%) and Russian Ruble (+4.2%), and losses in the Turkish Lira (-3.4%).

The US interest rate curve steepened in December (see page 12). 10 year rates closed the month at 1.92%, up from 1.78% at November month end. US investment grade and high yield spreads tightened (see page 13).

In commodities, the GSCI index moved higher in December (see page 11), with gains in Energy (+9.4%), Agricluture (+4.4%), Precious Metals (+3.7%), Industrial Metals (+2.9%), and Livestock (+1.5%). Within individual commodities, Crude Oil (+11%), Brent Crude (+10.9%), and Coffee (+9.1%) saw the biggest gains, while Natural Gas (-3.7%), Cocoa (-1%), and Live Cattle (-0.1%) saw the biggest losses. Gold was up 3.6% in December.

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Year End 2019

Twenty nineteen is now ending, goodbye to the year and the decade,
Let's look back and then move forward, please do not be afraid.
As always in a year, there's been bad and there's been good,
We'll examine both below, we'll take a look under the hood.
The Patriots won again, they now have six Super Bowls,
This season may be different, their offense appears to have some holes.
We had some first time winners, that started brand new chapters,
The Nationals in DC, in Canada the Toronto Raptors.
In soccer the US women, took the win over in France,
UVA in college hoops, took the win in the big dance.

Many legends we have lost, great legacies they did bestow,
Supreme Court justice John Paul Stevens, the billionaire Ross Perot.
Fashion designer Karl Lagerfeld, actress and singer Doris Day,
JuiceWRLD the emo rapper, legendary architect IM Pei.
Peter Mayhew played Chewbacca, Cameron Boyce one of Disney's stars,
Eddie Money's got tickets to paradise, Ric Ocasek headlined the Cars.
Lee Iacocca rescued Chrysler, Gloria Vanderbilt's blue jeans were so tight,
Paul Volcker tamed inflation, Toni Morrison sure could write.
More shocking deaths emerged, fighting Thanos in Endgame,
Without Ironman and Black Widow, the Avengers won't be the same.

In Maduro’s Venezuela, things have really gone downhill,
A catastrophic dam break, in neighboring Brazil.
A crash in Ethiopia, revealing flaws for Boeing’s Max,
Mosque shootings in New Zealand, in Sri Lanka church attacks.
A mass shooting in El Paso, hours later a Dayton copy,
A Mormon massacre in Mexico, in the DR they shot Big Papi.
A tragic dive boat fire, California homes destroyed by flame,
The rainforest too is burning, another fire wrecked Notre Dame.
To know the climate’s not like the past, you don’t have to be a historian,
Just look at the Venice flooding, or the wreckage left by Dorian.

Trump and Kim Jong Un, becoming buddies seemingly,
Met up in Vietnam, then crossed Korea’s DMZ.
Major protests in Hong Kong, much to China’s consternation,
Riots too in Chile, over subway fare inflation.
Drone attacks on Saudi oil, Iran allegedly the source,
Al-Baghdadi in a tunnel, taken out by Delta Force.
Elections there were many, Zelensky in Ukraine,
Who then was asked to play a role, in an American campaign.
Modi’s BJP in India, won in a significant landslide,
As did Johnson in old England, where Brexit will not be denied.

The Dems too are campaigning, and grandstanding up on stage,
They're shaking all their fists, some are filled with lots of rage.
If you don't know whom to back, ask your daddy or your mommy,
There's the extremist Lizzie Warren, or Bernie the old commie.
After watching them debate, it's hard to feel inspired,
Andy Yang has decent energy, Joey Biden's looking tired.
Mayor Pete is quite articulate, he's one of two Rhodes scholars,
The other's Cory Booker, though he's behind in campaign dollars.
Billionaires Steyer and Bloomberg, have joined the magic quest,
Along with Klobuchar and Gabbard, they're a bit of a snooze fest.

In the markets things were rosy, as equities screamed higher,
For every stupid seller, there was an even dumber buyer.
Despite a trade war and more tariffs, and a brief inversion in the curve,
Jay Powell had your back, and gave the bulls plenty of nerve.
But not so unicorn IPOs, which were pretty much a bust,
And so in private valuations, engendering distrust.
Uber, Lyft, and Slack all traded lower, and then there was WeWork,
Where Masa bailed out Neumann, who ran off with billions and a smirk.
Crude oil rallied strongly, the bitcoin almost had a double,
Not so the bonds of Argentina, where an election caused some trouble.

So wrap up your year end business, wrap up the presents too,
Perhaps a baby Yoda, or some Air Pods for your crew.
Get away from all the noise, go find a respite on some beach,
Whichever side you’re on, of the motion to impeach.
In the coming vote next year, we may change the President’s name,
But we all should be prepared, that it may remain the same.
Let’s resolve to be more civil, on all of us rests this onus,
Let’s worry more about each other, than the size of this year’s bonus.
Happy New Year to you all, we’ve made it through another year,
Be good to those around you, and spread some holiday cheer.

November 2019 - Monthly Market Commentary

November was a fairly strong month for global risk assets, as developed market equities rose, emerging market equities were mixed, the US yield curve shifted slightly higher, the US dollar rose, credit spreads tightened, and the oil complex rallied. The US ISM manufacturing activity index rose slightly in October, but remained below 50, signaling continued contraction in the sector, while the non-manufacturing index rose to 54.7. In Congressional testimony, Fed Chairman Powell indicated that another interest rate cut was unlikely this year. US consumer prices rose 0.4% in October, while the US budget deficit for the 12 months ended in October exceeded $1 trillion for the first time since February 2013. Consumer inflation in China rose 3.8% in October from a year earlier, driven by soaring pork prices, though producer prices fell 1.6%, and the People’s Bank of China cut its lending benchmark rate. Japan’s GDP grew at a 0.2% annualized rate in the third quarter, the slowest pace in a year. The US jobs report showed that 128,000 jobs were added in October (the 109th consecutive month of job creation), the unemployment rate ticked higher to 3.6%, the labor force participation rate increased to 63.3%, average hourly earnings rose 3% from a year earlier, and the total labor force hit a record high of 164.4 million, of which 158.5 million were employed.

Developed market equities were mostly higher in November (see page 8), with the biggest gains in the S&P 500 (+3.6%), Canada (+3.5%), and Germany (+3%), and losses in Hong Kong (-1.6%). US small caps outperformed large caps, with the Russell 2000 up 4.1% and the Russell 1000 up 3.8% (see page 3). IT (+5.4%), Financials (+5%), and Health Care (+5%) were the best performing sectors in November; Utilities (-1.8%), Real Estate (-1.7%), and Consumer Staples (+1.3%) were the worst performing sectors (see page 2). Large cap growth (+4.4%) outperformed large cap value (+3.1%) in November (see page 3). Emerging market equities were mixed in November (see page 9), with the biggest gains in Argentina (+7.1%), Taiwan (+1.8%), and China (+1.7%), and losses in the Philippines (-3.2%), Indonesia (-2.4%), and Malaysia (-2.1%).

In currencies, the USD Index was higher (+0.9%) in November (see page 10). The Australian Dollar (-1.9%), Swiss Franc (-1.4%), and Japanese Yen (-1.3%) weakened the most against the USD, while the Swedish Krona (+0.8%), New Zealand Dollar (+0.1%) strengthened. Emerging market currencies were mostly weaker against the USD, with gains in the South African Rand (+3%) and Chinese Yuan (+0.3%), and the largest losses in the Brazilian Real (-5.1%), Mexican Peso (-1.6%), and Korean Won (-1%).

The US interest rate curve shifted higher in November (see page 12). 10 year rates closed the month at 1.78%, up from 1.69% at October month end. US investment grade and high yield spreads tightened in November (see page 13).

In commodities, the GSCI index was flat in November (see page 11), with gains in Energy (+1%), and losses in Precious Metals (-3.4%), Industrial Metals (-2.7%), Livestock (-2%), and Agriculture (-0.1%). Within individual commodities, Coffee (+13.4%), Cocoa (+7.4%), and Wheat (+5.7%) saw the biggest gains, while Natural Gas (-16.1%), Lean Hogs (-11%), and Silver (-6%) saw the biggest losses.

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October 2019 - Monthly Market Commentary

October was a fairly strong month for global risk assets, as developed and emerging market equities mostly rose, the US yield curve steepened, the US dollar weakened, credit spreads tightened, and oil rallied. The Federal Reserve cut interest rates by 25bps for the third time since July, and highlighted weak business investment in its statement. Third quarter US GDP grew at 1.9%, supported by strong consumer and government spending. The US ISM manufacturing activity index fell to its lowest level since June 2009, while the nonmanufacturing index fell to the lowest level since August 2016. Australia’s central bank cut interest rates to a record low 0.75%, the third rate cut in five months. China’s exports to the US fell by 22% in September from a year earlier, and total exports fell 3.2%. Chinese GDP grew 6% in the third quarter, the slowest rate of growth since the current measure of GDP was adopted in 1992. The US jobs report showed that 136,000 jobs were added in September (the 108th consecutive month of job creation), the unemployment rate fell to 3.5%, the labor force participation rate held at 63.2%, average hourly earnings rose 2.9% from a year earlier, and the total labor force hit a record high of 164 million.

Developed market equities were mostly higher in October (see page 8), with the biggest gains in Japan (+4.9%), Hong Kong (+4.7%), and Germany (+3.5%), and biggest losses in the UK (-2.1%), Canada (-0.9%), and Australia (-0.4%). US small caps outperformed large caps, with the Russell 2000 up 2.6% and the Russell 1000 up 2.1% (see page 3). Healthcare (+5.1%), IT (+3.9%), and Communication Services (+3%) were the best performing sectors in October; Energy (-2.3%), Utilities (-0.8%), and Consumer Staples (-0.1%) were the worst performing sectors (see page 2). Large cap value (+1.4%) underperformed large cap growth (+2.8) in October (see page 3). Emerging market equities were mostly higher in October (see page 9), with the biggest gains in Russia (+7.4%), Taiwan (+6.1%), and India (+4.4%), and the losses in Argentina (-4.8%) and Thailand (-2.8%).

In currencies, the USD Index was lower (-2%) in October (see page 10), with the biggest gains against the USD seen in the British Pound (+5.3%), New Zealand Dollar (+2.4%), and Euro (+2.3%); the Norwegian Krone (-1%) moved lower against the USD. Emerging market currencies were mostly higher against the USD, with the largest gains in the Brazilian Real (+3.4%), Mexican Peso (+2.6%), and Korean Won (+2.5%), and losses in the Turkish Lira (-1.1%) and Indian Rupee (-0.6%).

The US interest rate curve steepened in October (see page 12). 10 year rates closed the month at 1.69%, up from 1.66% at September month end. US investment grade and high yield spreads tightened in October (see page 13).

In commodities, the GSCI index was up 1.2% in October (see page 11), with gains in Precious Metals (+3.3%), Industrial Metals (+1.7%), Livestock (+1.5%), Agriculture (+1.4%), and Energy (+0.9%). Within individual commodities, Palladium (+6.7%), Silver (+6.4%), and Live Cattle (+6.4%) saw the biggest gains, while Lean Hogs (-9%), Cocoa (-1.5%), and Sugar (-1.2%) saw the biggest losses.

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September 2019 - Monthly Market Commentary

September was a fairly strong month for global risk assets, as developed and emerging market equities mostly rose, global interest rates moved higher from historic August lows, the US yield curve steepened, but remained inverted, the US dollar strengthened, credit spreads widened, and gold retreated. The Federal Reserve cut interest rates by 25bps, and highlighted strong household spending and weaker business investment and exports. The August reading of the ISM’s manufacturing index fell below 50 for the first time in three years, a sign of contraction in the sector. China’s central bank cut bank reserve requirements for the third time this year in an effort to stimulate the economy; China’s exports unexpectedly fell 1% in August from a year earlier. In Europe, the ECB’s outgoing President Draghi announced a cut to its key interest rate and a new package of bond purchases. The US jobs report showed that 130,000 jobs were added in August (the 107th consecutive month of job creation), the unemployment rate held at 3.7%, the labor force participation rate increased to 63.2%, average hourly earnings rose 3.2% from a year earlier, and the total labor force hit a record high of 163.9 million.

Developed market equities were mostly higher in September (see page 8), with the biggest gains in Japan (+5.9%), Spain (+5.1%), and Italy (+3.6%), and losses in Hong Kong (-0.6%). US small caps outperformed large caps, with the Russell 2000 up 2.1% and the Russell 1000 up 1.7% (see page 3). Financials (+4.6%), Utilities (+4.3%), and Energy (+3.8%) were the best performing sectors in September; Healthcare (-0.2%), Communication Services (+0.4%), and Consumer Discretionary (+0.9%) were the worst performing sectors (see page 2). Large cap value (+3.6%) outperformed large cap growth (flat) in September (see page 3). Emerging market equities were mostly higher in September (see page 9), with gains in Argentina (+8.5%), Korea (+5.8%), and Brazil (+3.3%), and the largest losses in Indonesia (-2.8%), the Philippines (-2.4%), and Malaysia (-1%).

In currencies, the USD Index was higher (+0.5%) in September (see page 10), with the biggest losses seen in the Japanese Yen (-1.7%), New Zealand Dollar (-1%), and Swiss Franc (-0.8%); the British Pound (+1.1%) and Canadian Dollar (+0.5%) moved higher against the USD. Emerging market currencies were mostly higher against the USD, with the largest gains in the Turkish Lira (+3.3%), Russian Ruble (+2.9%), and Mexican Peso (+1.7%), and losses in the Brazilian Real (-0.3%).

The US interest rate curve steepened in September, but remained inverted (see page 12). 10 year rates closed the month at 1.66%, up from 1.50% at August month end. US investment grade and high yield spreads widened in September (see page 13).

In commodities, the GSCI index was up 1.7% in September (see page 11), with gains in Livestock (+7.8%), Agriculture (+5.3%), Energy (+0.8%), and Industrial Metals (+0.6%), and losses in Precious Metals (-3.9%). Within individual commodities, Lean Hogs (+10.8%), Cocoa (+10.1%), and Feeder Cattle (+9.2) saw the biggest gains, while Silver (-7.2%), Platinum (-5%), and Gold (-3.5%) saw the biggest losses.

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August 2019 - Monthly Market Commentary

August was a difficult month for global risk assets, as developed and emerging market equities retreated (led by Argentina’s -50% move), global interest rates moved sharply lower as yields on the US 30 year bond hit a record low, the US yield curve inverted further, the US dollar strengthened (as the Chinese Yuan hit a 10 year low), the oil complex weakened, and gold rallied. The amount of global debt with negative yields reached a new record in August in excess of $17 trillion, with 30% of global investment grade securities bearing negative yields. At the Jackson Hole Economic Policy Symposium, Fed Chairman Powell kept future interest rate cuts on the table, but highlighted the Fed’s limits in countering economic uncertainty stemming from trade disputes. China’s urban unemployment rose to 5.3% in July, the highest level since reporting began. Amidst Brexit uncertainty, UK and German GDP contracted by 0.2% and 0.1% in the second quarter, respectively. In the Asia Pacific region, central banks in India, New Zealand, and Thailand cut interest rates in August. The US jobs report showed that 164,000 jobs were added in July (the 106th consecutive month of job creation), the unemployment rate held at 3.7%, the labor force participation rate increased to 63%, average hourly earnings rose 3.2% from a year earlier, and the total labor force hit a record high of 163.4 million.

Developed market equities were mostly lower in August (see page 8), with the biggest losses in Hong Kong (-8.2%), the UK (-4.2%), and Japan (-3.2%). US small caps underperformed large caps, with the Russell 2000 down 4.9% and the Russell 1000 down 1.8% (see page 3). Utilities (+5.2%), Real Estate (+4.9%), and Consumer Staples (+1.8%) were the best performing sectors in August; Energy (-8.1%), Financials (-4.8%), and Materials (-2.8%) were the worst performing sectors (see page 2). Large cap value (-2.9%) underperformed large cap growth (-0.8%) in August (see page 3). Emerging market equities were mostly lower in August (see page 9), with gains in Mexico (+5.3%) and India (+0.8%), and the largest losses in Argentina (-50.4%), China (-3.9%), and Thailand (-3.1%).

In currencies, the USD Index was higher (+0.4%) in August (see page 10), with the biggest losses against the USD in the New Zealand Dollar (-3.5%), Norwegian Krone (-2.8%), and Australian Dollar (-1.6%); the Japanese Yen (+2.4%) moved higher against the USD. Emerging market currencies were mostly lower against the USD, with gains in the Thai Baht (+0.9%), and the largest losses in the Brazilian Real (-8.1%), South African Rand (-5.6%), and Mexican Peso (-4.6%).

The US interest rate curve shifted lower and inverted further in August (see page 12). 10 year rates closed the month at 1.50%, down from 2.01% at July month end. US investment grade and high yield spreads widened in August (see page 13).

In commodities, the GSCI index was down 5.6% in August (see page 11), with gains in Precious Metals (+7%), and losses in Livestock (-8.7%), Agriculture (-6.8%), Energy (-6.6%), and Industrial Metals (-1.5%). Within individual commodities, Silver (+11.1%), Gold (+6.5%), and Platinum (+6.2) saw the biggest gains, while Lean Hogs (-10.4%), Gasoline (-9.6%), and Corn (-9.5%) saw the biggest losses.

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