April 2020 - Monthly Market Commentary

Risk assets mostly rebounded in April from the sharp March selloff, as many regional coronavirus infection and hospitalization curves flattened and then declined, some economies began a gradual reopening, and dramatic fiscal and monetary stimulus was implemented around the world. Global equities moved mostly higher, with the energy sector and growth stocks leading the rally, the US yield curve flattened slightly, the US dollar index was unchanged, credit spreads tightened, and oil’s historic collapse continued. The Federal Reserve held interest rates near zero at its April meeting, and indicated that the central bank will “use its tools and act as appropriate to support the economy”, and that additional fiscal stimulus would likely be required to support an economic recovery. Similarly, the ECB kept interest rates unchanged at its April meeting, but indicated that it stood prepared to increase its previously enacted stimulus measures as needed. The US Congress passed an additional $480 billion stimulus package, which, among other things, added additional funding to the previously enacted Paycheck Protection Program. First quarter GDP declined 4.8% in the US, the largest quarterly decline since Q4 2008, and 3.8% in the euro zone, the largest quarterly decline since records began in 1995. For the week ended April 25, the number of Americans filing for unemployment hit 3.8 million, bringing the rolling six week total to 30.3 million. The lagging indicator US jobs report showed that 701,000 jobs were lost in March (ending a record streak of 113 consecutive months of job creation), the unemployment rate rose to 4.4% (off of a 50 year low of 3.5%), the labor force participation rate fell to 62.7%, average hourly earnings rose 3.1% from a year earlier, and the total labor force fell to 162.9 million, of which 155.8 million were employed.

Developed market equities rebounded in April (see page 8), led by the S&P500 (+12.8%), Germany (+9.9%), and Canada (+9.6%). US small caps slightly outperformed large caps, with the Russell 2000 up 13.7%, and the Russell 1000 up 13.2% (see page 3). All 11 S&P 500 sectors were up in April with the biggest gains in Energy (+29.8%), Consumer Discretionary (+20.5%), and Materials (+15.3%). Large cap growth (+14.8%) outperformed large cap value (+11.2%) in April (see page 3). Emerging market equities also rebounded (see page 9), with the biggest gains in India (+15.3%), Thailand (+14.4%), and Taiwan (+12.2%).

In currencies, the USD Index was flat in April (see page 10). The Australian Dollar (+6.2%), New Zealand Dollar (+2.9%), and Swedish Koran (+1.5%) saw the biggest gains against the USD, while the Euro (-0.7%) and Swiss Franc (-0.5%) weakened. Emerging market currencies were mixed against the USD, with the biggest gains in the Indonesian Rupiah (+7.5%), Russian Ruble (+5.7%), and Taiwan Dollar (+1.8%), and the biggest losses in the Turkish Lira (-5.3%), Brazilian Real (-5.1%), and South African Rand (-3.7%).

The US interest rate curve flattened slightly in April (see page 12). 10 year rates closed the month at 0.64%, down from 0.67% at March month end. US investment grade and high yield spreads tightened (see page 13).

In commodities, the GSCI index moved lower (-9.7%) in April (see page 11), with losses in Energy (-19.5%), Livestock (-5.2%), and Agriculture (-4.8%), and gains in Precious Metals (+6%) and Industrial Metals (+1%). Within individual commodities, Gasoline (+21%), Cotton (+11.6%), and Platinum (+11.4%) saw the biggest gains, while Crude Oil (-40.7%), Heating Oil (-19.8%), and Palladium (-15.1%) saw the biggest losses. Gold was up 6.1% in April.

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The New Age of Covid

We’re hiding in our basements, we’re staying off the grid,
We’re scared to go outside, in the new age of covid.
To flatten out the curve, in bunkers we have hid,
Waiting for the apex, in the new age of covid.
Social distancing’s the norm, any closeness we forbid,
Six feet of separation, in the new age of covid.

The virus is among us, spreading its tentacles like a squid,
Asymptomatic carriers, in the new age of covid.
Please don’t touch your face, your ear or your eyelid,
Don’t touch your nose or mouth, in the new age of covid.
It started out just slowly, suddenly into a crisis we all slid,
It’s exponential growth, in the new age of covid.

Wuhan, Daegu, New Orleans, Milan, New York, Madrid,
Cross continental pandemic hotspots, in the new age of covid.
The old, middle aged, and young, grandparent and grandkid,
It appears no one is safe, in the new age of covid.
Sanitizer, soap, and wipes, anything to help us to get rid,
Of the deadly pathogen, in the new age of covid.

ICU counts and death rates, it all seems quite morbid,
Flying blind without good testing, in the new age of covid.
The national stockpile has run dry, divvy it all up we did,
Hoards last only a few weeks, in the new age of covid.
For PPE and ventilators, sadly many have been outbid,
Every state is on its own, in the new age of covid.

How to cope with all this horror, this sadness we’re amid?
The lonely suffering of so many, in the new age of covid.
We must stay strong alone together, into despair we musn’t skid,
Humanity will emerge triumphant, from the new age of covid.
Better treatments and immunity, on this scourge will put a lid,
And finally a vaccine, will bring us to a new age post covid.

March 2020 - Monthly Market Commentary

Risk assets sold off sharply across all asset classes in March, as the corona virus spread across the globe and its devastating impact on the global economy came into focus. Global equities moved sharply lower, with the energy sector, small caps, and value stocks being the hardest hit, the US yield curve moved sharply lower and steepened, the US dollar strengthened, credit spreads widened, and the oil complex collapsed due to a combination of demand destruction stemming from the economic slowdown and increased supply resulting from a breakdown in production level agreements between OPEC and Russia. The Federal Reserve took a series of emergency steps during March, including cutting rates to zero, and launching an unlimited and open-ended asset purchase program, including, for the first time, corporate bonds, a program to support the flow of credit to large and small businesses, a commercial paper funding facility, and a lending facility for foreign central banks. For the week ended March 21, the number of Americans filing for unemployment hit a record 3.3 million, rendering the February US jobs report the ultimate lagging indicator; this report showed that 273,000 jobs were added in February (the 113th consecutive month of job creation), the unemployment rate moved lower to 3.5% (a 50 year low), the labor force participation rate held at 63.4%, average hourly earnings rose 3% from a year earlier, and of the total labor force of 164.6 million, 158.8 million were employed.

Developed market equities moved sharply lower in March (see page 8), with the biggest losses in Italy (-22.4%), Spain (-22%), and Australia (-21.1%). US small caps underperformed large caps, with the Russell 2000 down 21.7%, and the Russell 1000 down 13.2% (see page 3). All 11 S&P 500 sectors were down in March with the biggest losses in Energy (-34.8%), Financials (-21.3%), and Industrials (-19.2%). Large cap growth (-9.8%) outperformed large cap value (-17.1%) in March (see page 3). Emerging market equities moved lower in March (see page 9), with the biggest losses in Argentina (-32.1%), Brazil (-28.9%), and the Philippines (-21.8%).

In currencies, the USD Index was higher (+0.9%) in March (see page 10). The Japanese Yen (+0.5%) and Swiss Franc (+0.4%) strengthened against the USD, while the Norwegian Krone (-9.6%), Australian Dollar (-5.9%), and Canadian Dollar (-4.8%) saw the biggest losses. Emerging market currencies were mostly lower against the USD, with gains in the Taiwanese Dollar (+0.1%), and the biggest losses in the Mexican Peso (-17.3%), Russian Ruble (-14.8%), and Brazilian Real (-14.1%).

The US interest rate curve moved lower and steepened in March (see page 12). 10 year rates closed the month at 0.67%, down from 1.15% at February month end. US investment grade and high yield spreads widened (see page 13).

In commodities, the GSCI index moved lower (-29.4%) in March (see page 11), with losses in Energy (-47.7%), Livestock (-12.8%), Industrial Metals (-10.2%), and Agriculture (-4.1%), and gains in Precious Metals (+0.4%). Within individual commodities, Wheat (+8.4%), Coffee (+7.4%), and Gold (+1.8%) saw the biggest gains, while Gasoline (-60.2%), Crude Oil (-54.7%), and Brent Crude (-48.4%) saw the biggest losses.

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February 2020 - Monthly Market Commentary

Risk assets sold off sharply on coronavirus fears in February, as global equities moved sharply lower, the US yield curve moved lower across the curve and inverted further in the middle of the curve, the US dollar strengthened, credit spreads widened, and the oil complex sold off sharply. In the twelve months through January, the CPI index rose 2.5% and the PPI index rose 2.1%. The Chinese CPI index rose 5.4% in January, the highest level in eight years. Minutes from the January Fed meeting suggested that the “current stance of monetary policy was appropriate”, though by February month end Fed Chairman Powell said that the central bank would “act as appropriate to support the economy”. The US ISM manufacturing activity index rose in January to 50.9, signaling slight expansion in the sector, while the nonmanufacturing index rose to 55.5. The US jobs report showed that 225,000 jobs were added in January (the 112th consecutive month of job creation), the unemployment rate moved up to 3.6%, the labor force participation rate rose to 63.4%, average hourly earnings rose 3.1% from a year earlier, and the total labor force hit a record high of 164.6 million, of which 158.7 million were employed.

Developed market equities moved lower in February (see page 8), with the biggest losses in Japan (-9.6%), the UK (-9.1%), and Germany (-8.4%). US small caps slightly underperformed large caps, with the Russell 2000 down 8.4%, and the Russell 1000 down 8.2% (see page 3). All 11 S&P 500 sectors were down in February with the biggest losses in Energy (-14.6%), Financials (-11.2%), and Utilities (-9.9%). Large cap growth (-6.8%) outperformed large cap value (-9.7%) in February (see page 3). Emerging market equities moved lower in February (see page 9), with the biggest losses in Thailand (-11.2%), Russia (-10.5%), and Argentina (-8.3%).

In currencies, the USD Index was higher (+0.8%) in February (see page 10). The Swedish Krona (+0.2%) and Japanese Yen (+0.2%) strengthened against the USD, while the New Zealand Dollar (-3.4%), British Pound (-2.9%), and Australian Dollar (-2.6%) saw the biggest losses. Emerging market currencies were mostly lower against the USD, with gains in the Chinese Yuan (+0.3%), and the biggest losses in the Russian Ruble (-4.4%), Brazilian Real (-4.2%), and Turkish Lira (-4.2%).

The US interest rate curve moved lower and inverted further in the middle of the curve in February (see page 12). 10 year rates closed the month at 1.15%, down from 1.51% at January month end. US investment grade and high yield spreads widened (see page 13).

In commodities, the GSCI index moved lower (-8.4%) in February (see page 11), with losses in Energy (-12.4%), Livestock (-6.1%), Agriculture (-2.9%), Precious Metals (-1.9%), and Industrial Metals (-1.2%). Within individual commodities, Palladium (+12.3%), Coffee (+6.4%), and Copper (+1.4%) saw the biggest gains, while Crude Oil (-13.5%), Brent Crude (-12.5%), and Natural Gas (-10.1%) saw the biggest losses. Gold was down 1.2% in February.

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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.