Pages

About Us

My photo
CurAlea Associates LLC is an independent risk and due diligence advisory firm focused on hedge funds and family offices.

Tuesday, September 4, 2018

August 2018 - Monthly Market Commentary

August was a mixed month for global risk assets. Developed and emerging market equities were mixed, with US and growth outperformance, the USD strengthened, especially versus EM currencies, the US interest rate curve flattened, US corporate credit spreads were little changed, and the oil complex moved higher. The Federal Reserve left interest rates unchanged at its August meeting, but indicated that “economic activity has been rising at a strong rate” and that another interest rate increase was likely in September. The Bank of England raised its benchmark rate to 0.75%, the highest level since 2009. The US job report showed that 157,000 non-farm jobs were added in June (the 94th consecutive month of job creation), the unemployment rate decreased to 3.9%, the labor force participation rate held at 62.9%, and average hourly earnings rose 2.7% from a year earlier.

Notable corporate transactions announced in August included the $2.4 billion acquisition of Duo Security by Cisco, the $1.4 billion purchase of Axa Life Europe by Cinven, the $5.3 acquisition of Bemis by Amcor, the $1.2 billion purchase of Deep Gulf Energy by Kosmos Energy, the $5.3 billion acquisition of Dun & Bradstreet by an investor group led by CC Capital, Amadeus’ $1.5 billion purchase of TravelClick, the $3.4 billion purchase of an additional stake in Canopy Growth by Constellation Brands, the $8.4 billion acquisition of Energen by Diamondback Energy, the $1.6 billion purchase of KMG Chemicals by Cabot Microelectronics, Best Buy’s $800 million purchase of GreatCall, the $3.2 billion purchase of SodaStream by Pepsi, the $2.2 billion acquisition of Keystone Foods by Tyson Foods, the $800 million purchase of Ziylo by Novo Nordisk, the $300 million purchase of Zoe’s Kitchen by Cava Group, the Hartford’s $2.1 billion purchase of the Navigators Group, the $2.2 billion acquisition of Quadrant Energy by Santos, the $11 billion merger of TPG Telecom and Vodafone Hutchinson Australia, Stryker’s $1.4 billion purchase of K2M, the $473 million purchase of Cambian by CareTech, the $1.7 billion purchase of Universal Hospital Services by Federal Street Acquisition, and the $1.5 billion acquisition of esure and Bain Capital.

Developed market equities were mixed in August (see page 8), with gains in the S&P500 (+3.2%) and Australia (+1%), and the largest losses in Italy (-9%), Spain (-5.4%), and the UK (-3.3%). US large caps underperformed small caps, with the Russell 1000 up 3.4% and the Russell 2000 up 4.3% (see page 3). IT (+6.9%), Consumer Discretionary (+5.1%), and Healthcare (+4.4%) were the best performing sectors in August; Energy (-3.3%), Materials (-0.5%), and Industrials (+0.3%) were the worst performing sectors (see page 2). Large cap growth (+5.5%) outperformed large cap value (+1.5%) in August (see page 3). Emerging market equities were mixed in August (see page 9), with the largest gains in India (+4.4%), the Philippines (+3.2%), and Indonesia (+3%), and the largest losses in Argentina (-23.6%), China (-3.8%), and Brazil (-2.8%).

In currencies, the USD Index was up 0.6% in August (see page 10). The Swiss Franc (+2.2%) and Japanese Yen (+0.7%) gained against the USD, while the Swedish Krona (-3.9%), Australian Dollar (-3.2%), and New Zealand Dollar (-2.9%) had the largest losses. Emerging market currencies were mostly lower against the USD, with gains in the Thai Baht (+1.2%), and the largest losses in the Turkish Lira (-25%), South African Rand (-9.6%), and Brazilian Real (-7.3%).

The US interest rate curve flattened in August (see page 12). 10 year rates closed the month at 2.86%, down from 2.96% at July month end. US investment grade and high yield spreads were little changed in August (see page 13).

In commodities, the GSCI index was up 1.1% in August (see page 11), with gains in Energy (+3.6%), and losses in Agriculture (-5.5%), Industrial Metals (-2.9%), Precious Metals (-2.5%), and Livestock (-0.3%). Within individual commodities, Cocoa (+6%), Heating Oil (+4.9%), and Natural Gas (+4.8%) saw the biggest gains, while Coffee (-9.8%), Cotton (-8.1%), and Soybeans (-8.1%) saw the biggest losses. Gold was down 2% for the month.

Contact CurAlea Associates for a Daily Market Review.

Wednesday, August 1, 2018

July 2018 - Monthly Market Commentary

July was a fairly strong month for global risk assets. Developed and emerging market equities moved mostly higher, with value finally outperforming growth in the US, the USD index was flat, the US interest rate curve shifted higher, and credit spreads tightened. Minutes from the June Federal Reserve meeting showed that officials may seek to end an accommodative policy over the next year. In his Congressional testimony, Fed Chair Powell reaffirmed the rate hiking plan and stated that it was too soon to tell if recent trade disputes might change that plan. At its July meeting, the ECB left monetary policy and plans to end quantitative easing at year end unchanged. The Bank of Japan, meanwhile, indicated that it would continue its quantitative easing program for “an extended period of time”. Second quarter US GDP grew at a 4.1% annual rate, the strongest growth in almost four years. The US job report showed that 213,000 non-farm jobs were added in June (the 93rd consecutive month of job creation), the unemployment rate increased to 4%, the labor force participation rate rose to 62.9%, and average hourly earnings rose 2.7% from a year earlier.

Notable corporate transactions announced in July included the $22 billion deal whereby Dell Technologies will again become publicly traded via the acquisition of Dell tracker stock DVMT, the $3.7 billion sale by Enbridge of 19 natural gas gathering and processing plants to Brookfield, the $4.8 acquisition of Embraer’s commercial jet business by Boeing, the $1.2 billion purchase of Envirotainer by Cinven, the $1.5 billion acquisition of Camso by Michelin, Otsuka’s $430 million purchase of Visterra, the $5.6 billion acquisition of LifePoint Health by Apollo, the $2.6 billion acquisition of Charles River Development by State Street, the $4.2 billion purchase of Platform Specialty Products’ agrochemicals unit by UPL, Wren House’s $1.7 billion purchase of North Sea Midstream Partners, the $1.6 billion purchase of LCY Chemical by a consortium led by KKR, the $2.6 billion acquisition of Aleris by Novelis, the $2.6 billion purchase of Linxens by Tsinghua Unigroup, the $640 million purchase of Leumi Card by Warburg Pincus, BP’s purchase of shale assets from BHP Billiton for $10 billion, the $1.8 billion acquisition of various food businesses from SGA Food Group by US Foods, the $11.4 billion acquisition of Forest City by Brookfield, SS&C’s $1.5 billion purchase of Eze Software, the $2.9 billion purchase of Supervalu by United Natural Foods, the $1.7 billion purchase of a majority of Cetera Financial by Genstar Capital, the $5.5 billion merger of NCI Building Systems and Ply Gem, the $2.6 billion purchase of the Norwegian unit of TDC by Telia, the $1 billion purchase of US Security Associates by Allied Universal, the $800 million acquisition of Datorama by Salesforce, the $1.3 billion merger of Akebia Therapeutics and Keryx Biopharmaceuticals, the $1.8 billion purchase of Neovia by ADM, the $2.5 billion acquisition of Suse by EQT, and the $19 billion acquisition of CA Technologies by Broadcom.

Developed market equities moved higher in July (see page 8), with the largest gains in Germany (+4.1%), the S&P500 (+3.7%), and Spain (+3.6%). US large caps outperformed small caps, with the Russell 1000 up 3.5% and the Russell 2000 up 1.7% (see page 3). Industrials (+7.3%), Healthcare (+6.6%), and Financials (+5.3%) were the best performing sectors in July; Real Estate (+1.1%), Energy (+1.4%), and Consumer Discretionary (+1.8%) were the worst performing sectors (see page 2). Large cap growth (+2.9%) underperformed large cap value (+4%) in July (see page 3). Emerging market equities were mostly higher in July (see page 9), with the largest gains in Argentina (+14.1%), Brazil (+9.2%), and Thailand (+8.2%), and losses in China (-2.5%) and Korea (-1.2%).

In currencies, the USD Index was up 0.1% in July (see page 10). The Swedish Krona (+1.8%), Canadian Dollar (+1%), and New Zealand Dollar (0.7%) were the best performing against the USD, while the Japanese Yen (-1.1%), British Pound (-0.6%), and Norwegian Krone (-0.1%) moved lower. Emerging market currencies were mostly higher against the USD, with the largest gains in the Mexican Peso (+6.8%), South African Rand (+3.4%), and Brazilian Real (+3.2%).

US interest rates rose in July (see page 12). 10 year rates closed the month at 2.96%, up from 2.86% at June month end. Investment grade and high yield spreads tightened in July (see page 13).

In commodities, the GSCI index was down 3.5% in July (see page 11), with gains in Agriculture (+3.9%), and losses in Industrial Metals (-5.1%), Energy (-4.9%), Livestock (-4.1%), and Precious Metals (-2.5%). Within individual commodities, Wheat (+10.7%), Cotton (+6.9%), and Soybeans (+4.6%) saw the biggest gains, while Sugar (-13.7%), Lean Hogs (-13.5%), and Cocoa (-13.5%) saw the biggest losses. Gold was down 2.4% for the month.

Contact CurAlea Associates for a Daily Market Review.

Monday, July 2, 2018

June 2018 - Monthly Market Commentary

June was another mixed month for global risk assets. Developed market equities were mixed, with the US small cap Russell 2000 index hitting an intra-month all-time high, emerging market equities were mostly lower with a very large spread between winners and losers, the USD strengthened, US interest rates increased, the oil complex moved higher, and credit spreads widened. The Federal Reserve increased rates by 25 basis points at its June meeting, the seventh rate hike since this hiking cycle started in 2015, with two more increases expected this year. The ECB indicated that it would end its bond buying program by year end, but that it would wait through the summer of 2019 before raising interest rates. The BOJ, meanwhile, indicated that it would be making no changes to its own quantitative easing policies. The US job report showed that 223,000 non-farm jobs were added in May (the 92nd consecutive month of job creation), the unemployment rate fell to 3.8%, the labor force participation rate fell slightly to 62.7%, and average hourly earnings rose 2.7% from a year earlier.

Notable corporate transactions announced in June included the $7.5 billion acquisition of GitHub by Microsoft, the $395 million acquisition of Rawlings Sporting Goods by Seidler Equity and Major League Baseball, the purchase of AmTrust Financial Services by a group led by Stone Point Capital for $2.95 billion, Fortive’s $2.8 billion purchase of the advanced sterilization products unit of Johnson & Johnson, the $2.1 billion acquisition of LifeScan by Platinum Equity, the $2.5 billion acquisition of Varsity Brands by Bain Capital, the $5.3 billion purchase of Foundation Medicine by Roche, Veritas Capital’s $4.9 billion purchase of Cotiviti, the $400 million purchase of Hyperwallet by PayPal, the $1.6 billion acquisition of AppNexus by AT&T, the $10.9 billion purchase of Pinnacle Foods by Conagra Brands, the sale by Tyson Foods of its Sara Lee frozen bakery and Van’s businesses to Kohlberg & Co., Advent International’s purchase of an 80% stake in Walmart Brazil for $0, the $6 billion merger of Nets and Concardis, the $2 billion acquisition of Europac by DS Smith, Workday’s $1.6 billion purchase of Adaptive, the $7 billion purchase of USG by Knauf, the $1.4 billion purchase of Rent-A-Center by Vintage Capital, the $1.4 billion acquisition of Worldwide Flight Services by Cerberus Capital, the $4.2 billion purchase of a stake in SFR TowerCo by KKR, the $2 billion purchase of Web.com by Siris Capital, GE’s spin-off of its healthcare business and the divestiture of its stake in Baker Hughes, and the $1 billion acquisition of PillPack by Amazon.

Developed market equities were mixed in June (see page 8), with the largest gains in Australia (+3.7%), Spain (+2.6%), and Canada (+1.6%); the S&P500 was up 0.6%. The largest losses were in Hong Kong (-4.9%), Germany (-2.4%), and France (-1%). US small caps slightly outperformed large caps, with the Russell 2000 up 0.7% and the Russell 1000 up 0.6% (see page 3). Consumer Staples (+4.5%), Real Estate (+4.4%), and Consumer Discretionary (+3.6%) were the best performing sectors in June; Industrials (-3.3%), Financials (-1.9%), and IT (-0.4%) were the worst performing sectors (see page 2). Large cap growth (+1%) outperformed large cap value (+0.2%) in June (see page 3). Emerging market equities were mostly lower in June (see page 9), with losses in Argentina (-22%), Thailand (-7.1%), and Brazil (-5.3%); Mexico (+7.3%), Russia (+0.9%), and India (+0.5%) were the best performing.

In currencies, the USD Index was up 0.5% in June (see page 10). The Norwegian Krone was up +0.3% against the USD, while the worst performing currencies were the New Zealand Dollar (-3.3%), Australian Dollar (-2.2%), and Japanese Yen (-1.7%). Emerging market currencies were mostly lower against the USD, with the largest losses in the South African Rand (-7.5%), Brazilian Real (-3.8%), and Chinese Yuan (-3.4%).

US interest rates rose in June (see page 12). 10 year rates closed the month at 2.86%, unchanged from May month end. Investment grade and high yield spreads widened in June (see page 13).

In commodities, the GSCI index was up 1.4% in June (see page 11), with gains in Energy (+5.3%) and Livestock (+2.8%), and losses in Agriculture (-10.1%), Industrial Metals (-4.6%), and Precious Metals (-3.5%). Within individual commodities, Crude Oil (+10.9%), Live Cattle (+2.8%), and Feeder Cattle (+2.8%) saw the biggest gains, while Soybeans (-15.3%), Corn (-10.8%), and Coffee (-8.5%) saw the biggest losses. Gold was down 3.7% for the month.

Contact CurAlea Associates for a Daily Market Review.

Friday, June 1, 2018

May 2018 - Monthly Market Commentary

May was a very mixed month for global risk assets. Developed market equities were mixed, with the US small cap Russell 2000 index hitting an all-time high while southern European indices were down sharply, emerging market equities were also mixed with a very large spread between winners and losers, the USD strengthened, the US yield curve flattened, oil and gold moved lower, and credit spreads widened. The biggest macro news in May was the political uncertainty in Italy amid concern over a euroskeptic coalition government; this reignited concerns over the stability of the Eurozone and led to a sharp selloff in Italian sovereign debt and other related risk assets. Earlier in the month, the Federal Reserve kept rates unchanged and minutes from the meeting indicated a high likelihood of a June rate hike; towards month end, however, market expectations of four or more rate hikes in 2018 fell sharply from 45% to 10% on Itexit fears. The US job report showed that 164,000 non-farm jobs were added in April (the 91st consecutive month of job creation), the unemployment rate fell to 3.9%, the labor force participation rate fell slightly to 62.8%, and average hourly earnings rose 2.6% from a year earlier.

Notable corporate transactions announced in May included the $1 billion acquisition of Cisco’s service provider video software business by Permira, the $4.3 billion purchase of KLX by Boeing, the $2.1 billion acquisition of the electrical and automation business of Larsen & Toubro by Schneider Electric, the purchase of several children’s entertainment assets by Hasbro from Saban Entertainment for $522 million, Blackstone’s $7.6 billion purchase of Gramercy Property Trust, the $3 billion acquisition of ZPG by Silver Lake, the $10.5 billion acquisition of Williams Partners by Williams, the $5.4 billion purchase of Techem by a consortium led by Partners Group, Walmart’s $16 billion purchase of a 77% stake in Flipkart, the $500 million purchase of Tate’s Bake Shop by Mondelez, the $7.1 billion acquisition of Frutarom by IFF, the $3 billion purchase of Financial Engines by Hellman & Friedman, the $1.9 billion sale of a majority stake in Baidu’s financial services arm to TPG and Carlyle, Vodafone’s $23 billion purchase of assets in four European countries from Liberty Global, the $1.2 billion acquisition of Glassdoor by Recruit, the $1.6 billion acquisition of ARMO BioSciences by Eli Lilly, Paypal’s $2.2 billion purchase of iZettle, the $2 billion purchase of Abaxis by Zoetis, the $5 billion merger of Saudi British Bank and Alawwal Bank, the $11 billion acquisition of GE’s rail division by Wabtec, the $1.7 billion purchase of Magento Commerce by Adobe, the $1.9 billion purchase of Ipreo by IHS Markit, the $1.1 billion acquisition of PowerPlan by Roper Technologies, the $4.7 billion acquisition of MB Financial by Fifth Third Bancorp, Blackstone’s $3.7 billion purchase of LaSalle Hotel Properties, KKR’s $8 billion acquisition of BMC Software, and the $2 billion sale of Pret A Manger to JAB Holdings.

Developed market equities were mixed in May (see page 8), with the largest gains in Canada (+3.2%), UK (2.6%), and S&P 500 (+2.3%). The largest losses were in Italy (-9.7%), Spain (-6.1%), and Japan (-1.7%). US small caps outperformed large caps, with the Russell 2000 up 6.1% and the Russell 1000 up 2.6% (see page 3). IT (+7.4%), Energy (+3.0%), and Industrials (+3.0%) were the best performing sectors in May; Telecom (-2.3%), Consumer Staples (-1.5%), and Utilities (-1.1%) were the worst performing sectors (see page 2). Large cap growth (+4.4%) outperformed large cap value (+0.6%) in May (see page 3). Emerging market equities were mostly lower in May (see page 9), with losses in Argentina (-21.9%), Brazil (-10.7%), and Mexico (-8.0%); China (+1.8%) and Taiwan (+1.1%) were the best performing. 

In currencies, the USD Index was up 2.3% in May (see page 10). The Australian Dollar, Swiss Franc, and Japanese Yen were up +0.5% against the USD, while the worst performing currencies were the British Pound (-3.4%), Euro (-3.2%), and Norwegian Krone (-2.0%). Emerging market currencies were mostly lower against the USD, with the largest losses in the Turkish Lira (-10.3%), Mexican Peso (-6.0%), and Brazilian Real (-6.0%); the Russian Ruble (1.0%) was the best performing.

US interest rates flattened in May (see page 12). 10 year rates closed the month at 2.86%, down from 2.95% at April month end. Investment grade and high yield spreads widened in May (see page 13).

In commodities, the GSCI index was up 1.4% in May (see page 11), with gains in Livestock (+2.2%), Industrial Metals (+2.1%), Energy (+1.5%), and Agriculture (+1.3%), and losses in Precious Metals (-1.2%). Within individual commodities, Cotton (+11.3%), Sugar (+9.0%), and Nat Gas (+6.2%) saw the biggest gains, while Cocoa (-13.0%), Soybeans (-2.7%), and Crude Oil (-2.0%) saw the biggest losses. Gold was down 1.4% for the month.

Contact CurAlea Associates for a Daily Market Review.

Tuesday, May 1, 2018

April 2018 - Monthly Market Commentary

April was another mixed month for global risk assets. Developed market equities moved higher, emerging market equities were mixed, the USD strengthened, the US yield curve steepened, the oil complex moved higher, and credit spreads tightened. The Federal Reserve minutes showed increased confidence that inflation would hit their 2% target in the coming year. At its policy meeting, the ECB made no change to interest rates and reiterated that it intends to keep rates at current levels well past the end of its asset purchase program. First quarter US GDP grew at a 2.3% annual rate, with a strong reading on business investment. The US job report showed that 103,000 non-farm jobs were added in March (the 90th consecutive month of job creation), the unemployment rate remained at 4.1%, the labor force participation rate fell slightly to 62.9%, and average hourly earnings rose 2.7% from a year earlier.

Notable corporate transactions announced in April included the $1 billion acquisition of part of GE’s healthcare division by Veritas Capital, the $8.7 billion purchase of AveXis by Novartis, the $1.6 billion acquisition of Exclusive Group by Permira, the purchase of Merck’s consumer health business by P&G for $4.2 billion, Francisco Partners’ $ 3.4 billion purchase of Verifone Systems, the $5.5 billion acquisition of NEX by CME, the $2.7 billion acquisition of Mobike by Meituan Dianping, JM Smucker’s $1.9 billion purchase of Ainsworth Pet Nutrition, the $5.4 billion purchase of Federal Mogul by Tenneco, the $450 million acquisition of Sunlight Supply by Scotts Miracle-Gro, the $2.4 billion purchase of Zentiva by Advent International, The Stars Group’s $4.7 billion purchase of Sky Betting & Gaming, the $2 billion acquisition of Mitel by Searchlight Capital, the $64 billion acquisition of Shire by Takeda, Square’s $365 million purchase of Weebly, the $26 billion merger of T-Mobile and Sprint, the $8.4 billion acquisition of DCT Industrial by Prologis, the $10.1 billion sale of Walmart’s UK business to J Sainsbury, the $20 billion purchase of Andeavor by Marathon Petroleum, and the $4.7 billion acquisition of ILG by Marriot Vacations.

Developed market equities were higher in April (see page 8), with the largest gains in Italy (+7.1%), UK (+6.8%), and France (+6.6%). US small caps outperformed large caps, with the Russell 2000 up 0.9% and the Russell 1000 up 0.3% (see page 3). Energy (+9.4%), Consumer Discretionary (+2.4%), and Utilities (+2.1%) were the best performing sectors in April; Consumer Staples (-4.3%), Industrials (-2.8%), and Telecom (-1.0%) were the worst performing sectors (see page 2). Large cap growth (+0.3%) was in line with large cap value (+0.3%) in April (see page 3). Emerging market equities were mixed in April (see page 9), with gains in India (+6.5%), Mexico (+5.2%), and Korea (+3.0%); Argentina (-4.7%), Indonesia (-3.6%), and Taiwan (-3.2%) were the worst performing.

In currencies, the USD Index was up 2.1% in April (see page 10). The Canadian Dollar was up +0.4% against the USD, while the worst performing currencies were the Swedish Krona (-4.7%), Swiss Franc (-3.7%), and Japanese Yen (-2.8%). Emerging market currencies were lower against the USD, with the largest losses in the Russian Ruble (-9.9%), Brazilian Real (-5.7%), and South African Rand (-4.9%); the Korean Won (-0.9%), Chinese Yuan (-0.9%), and Singapore Dollar (-1.1%) were the best performing.

US interest rates steepened in April (see page 12). 10 year rates closed the month at 2.95%, up from 2.74% at March month end. Investment grade and high yield spreads tightened in April (see page 13).

In commodities, the GSCI index was up 5.0% in April (see page 11), with gains in Energy (+6.5%), Industrial Metals (+4.3%), Agriculture (+2.8%), and Livestock (+1.0%), and losses in Precious Metals (-0.4%). Within individual commodities, Aluminum (+13.9%), Wheat (+9.6%), and Cocoa (+9.0%) saw the biggest gains, while Sugar (-5.2%), Lean Hogs (-4.9%), and Platinum (-2.9%) saw the biggest losses. Gold was down 0.5% for the month.

Contact CurAlea Associates for a Daily Market Review.

Monday, April 2, 2018

March 2018 - Monthly Market Commentary

March was a mixed month for global risk asskets. Developed and emerging market equities mostly moved lower, the USD weakened, the US yield curve flattened, the oil complex moved higher, and credit spreads widened. The Federal Reserve increased its benchmark rate by a quarter percentage point, with expectations for two to three additional hikes this year, and three hikes in 2019. The ECB dropped its pledge to accelerate its monthly bond purchases in case of economic weakness in a further step towards policy normalization. The US job report showed that 313,000 non-farm jobs were added in February (the 89th consecutive month of job creation), the unemployment rate remained at 4.1%, the labor force participation rate rose to 63%, and average hourly earnings rose 2.6% from a year earlier. 

Notable corporate transactions announced in March included the $8.3 billion acquisition of Microsemi by Microchip Technology, the $1.2 billion purchase of HSH Nordbank by Cerberus and JC Flowers, the $15.3 billion acquisition of XL Group by AXA, the purchase of 85% of MassMutual Japan by Nippon Life for $935 million, S&P Global’s $550 million purchase of Kensho Technologies, the $2.7 billion take private transaction of AmTrust, the $67 billion acquisition of Express Scripts by Cigna, Dana’s $6.1 billion purchase of GKN’s driveline division, the $11 billion purchase of Fibria Celulose bySuzano Papel e Celulose, the $1.8 billion acquisition of Oclaro by Lumentum, the $3.4 billion purchase of Orbotech by KLA-Tencor, Foxconn’s $866 million purchase of Belkin, and the $13 billion purchase of Novartis’ stake in their consumer health care joint venture by GlaxoSmithKline.

Developed market equities were lower in March (see page 8), with the largest losses in Australia (-4.1%), Japan (-3.1%), and Spain (-2.7%). US small caps outperformed large caps, with the Russell 2000 up 1.3% and the Russell 1000 down 2.3% (see page 3). Real Estate (+3.8%), Utilities (+3.8%), and Energy (+1.7%) were the best performing sectors in March; Financials (-4.3%), Materials (-4.2%), and IT (-3.9%) were the worst performing sectors (see page 2). Large cap growth (-2.7%) underperformed large cap value (-1.8%) in March (see page 3). Emerging market equities were mostly lower in March (see page 9), with the gains in Korea (+0.8%), Brazil (+0.4%), and Taiwan (+0.4%); Indonesia (-6.9%), Philippines (-5.8%), and India (-3.5%) were the worst performing. 

In currencies, the USD Index was down 0.5% in March (see page 10). The British Pound was up +1.9% and the Euro was up 0.9% against the USD, while the worst performing currencies were the Swiss Franc (-1.2%), Australian Dollar (-1.1%), and Swedish Krona (-0.8%). Emerging market currencies were mixed against the USD, with the biggest gains in the Mexican Peso (+3.6%), Korean Won (+2.1%), and Malaysian Ringgit (+1.5%); Turkish Lira (-3.6%), Brazilian Real (-2.0%), and Russian Ruble (-1.6%) were the worst performing.

US interest rates flattened in March (see page 12). 10 year rates closed the month at 2.74%, down from 2.86% at February month end. Investment grade and high yield spreads widened in March (see page 13).

In commodities, the GSCI index was up 2.2% in March (see page 11), with gains in Energy (+6.0%) and Precious Metals (+0.3%), and losses in Livestock (-7.2%), Industrial Metals (-4.5%), and Agriculture (-2.8%). Within individual commodities, Cocoa (+15.4%), Brent Crude (+7.6%), and Heating Oil (+6.1%) saw the biggest gains, while Live Cattle (-10.4%), Feeder Cattle (-9.6%), and Palladium (-8.9%) saw the biggest losses. Gold was up 0.4% for the month.

Contact CurAlea Associates for a Daily Market Review.

Thursday, March 1, 2018

February 2018 - Monthly Market Commentary

February saw a sharp reversal and subsequent bounce in global risk assets. Developed and emerging market equities moved lower, the USD strengthened, US interest rates rose across the curve, the oil complex moved lower, and credit spreads widened. The Bank of England kept rates unchanged, but indicated that tighter monetary policy may be in store given stronger economic growth. US CPI rose 2.1% from a year earlier, stoking fears of rising inflation and tighter US monetary policy. Minutes from the January Federal Reserve meeting indicated no change to the future path of rate increases, yet in his first Congressional testimony as Fed Chairman, Jerome Powell took a slightly more hawkish tone and suggested the possibility of four rate increases in 2018. The US job report showed that 200,000 non-farm jobs were added in January (the 88th consecutive month of job creation), the unemployment rate remained at 4.1%, the labor force participation rate remained at 62.7%, and average hourly earnings rose 2.9% from a year earlier.

Notable corporate transactions announced in February included the $2.5 billion acquisition of Modern Times by TDC, the $1 billion purchase of Avigilon by Motorola, the $1.4 billion sale of NRG’s integrated US renewable energy platform to Global Infrastructure Partners, the $500 million acquisition of the LA Times by Patrick Soon-Shiong, General Dynamics’ $6.8 billion purchase of CSRA, the $755 million purchase of Jarilowsky Fraser by Scotiabank, the $1.4 billion acquisition of Infinity Property and Casualty by Kemper, Charles River’s $800 million purchase of MPI Research, the $2.3 billion purchase of A. Schulman by LyondellBasell, the $24 billion merger of Albertsons and Rite Aid, the $1.2 billion purchase of CJ Healthcare by Korea Kolmar, Merck’s $394 million purchase of Viralytics, the $8 billion purchase of Blue Buffalo by General Mills, Roche’s $1.9 billion acquisition of Flatiron Health, the $400 million purchase of Poloniex by Circle, the $10 billion merger of Spectrum Brands and HRG, and the $1 billion purchase of Ring by Amazon.

Developed market equities were mostly lower in February (see page 8), with the largest losses in Spain (-6%), Germany (-5.2%), and Italy (-3.9%); Australia moved higher (+0.3%). US small caps underperformed large caps, with the Russell 2000 down 3.9% and the Russell 1000 down 3.7% (see page 3). Energy (-10.8%), Consumer Staples (-7.8%), and Telecom (-7.1%) were the worst performing sectors in February; IT moved slightly higher (+0.1%) (see page 2). Large cap growth (-2.6%) outperformed large cap value (-4.8%) in February (see page 3). Emerging market equities were mostly lower in February (see page 9), with the gains in Thailand (+2.5%), Russia (+1%), and Brazil (+0.5%); China (-6.4%), Mexico (-5.7%), and Argentina (-5.1%) were the worst performing.

In currencies, the USD Index was up +1.7% in February (see page 10). The Japanese Yen was up +2.3% against the USD, while the worst performing were the Swedish Krona (-4.9%), Canadian Dollar (-4%), and Australian Dollar (-3.6%). Emerging market currencies were mostly weaker against the USD, with the biggest losses in the Indonesian Rupiah (-2.9%), Indian Rupee (-2.5%), and Brazilian Real (-1.7%).

US interest rates moved higher across the curve in February (see page 12). 10 year rates closed the month at 2.86%, up from 2.71% at January month end. Investment grade and high yield spreads widened in February (see page 13).

In commodities, the GSCI index was down 3.3% in February (see page 11), with gains in Agriculture (+4.7%) and losses in Energy (-5.6%), Industrial Metals (-2.9%), Precious Metals (-2.1%), and Livestock (-1.7%). Within individual commodities, Cocoa (+9.6%), Wheat (+6.8%), and Cotton (+6%) saw the biggest gains, while Natural Gas (-11.2%), Gasoline (-7.9%), and Heating Oil (-7.6%) saw the biggest losses. Gold was down 1.8% for the month.

Contact CurAlea Associates for a Daily Market Review.