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

Wednesday, November 1, 2017

October 2017 - Monthly Market Commentary

October was a strong month for global risk assets.  Developed and emerging market equities were mostly higher, with large cap and growth outperformance in the US, the USD strengthened, commodities moved higher, and credit spreads tightened.  Minutes from the September Fed meeting showed that the central bank would likely raise rates once more before year end despite inflation running below their 2% target.  The ECB announced that it would continue its bond purchase program well into 2018, but that it would cut its monthly purchases in half to 30 billion euros starting in January; the ECB left interest rates unchanged and indicated that rate increases remain distant.  US GDP grew at a 3% annual rate in the third quarter, the first time since 2014 that the economy has grown by at least 3% for two consecutive quarters.  The US job report showed that 33,000 non-farm jobs were lost in September (largely attributed to hurricanes), the unemployment rate fell to 4.2%, and the labor force participation rate increased to 63.1%. 
Notable corporate transactions announced in October included the $1.35 billion acquisition of Asatsu-DK by Bain Capital, Carlyle’s $670 million acquisition of Accella Performance Materials, the $1.2 billion purchase of Guggenheim’s ETF business by Invesco, the $700 million sale of Kindred Healthcare’s nursing facility business to BlueMountain Capital, Bpost’s $820 million acquisition of Radial, BASF’s $7 billion purchase of Bayer’s crop assets, Aramark’s $1.35 billion purchase of Avendra and $1 billion purchase of AmeriPride Services, the $385 million purchase of Smarte Carte by 3i Group, the $335 million acquisition of Ruby Tuesday by NRD Capital, Siris Capital’s $1 billion purchase of Intralinks, the $250 million purchase of Clinical Innovations by EQT, Assurant’ $2.5 billion acquisition of The Warranty Group, the $235 million acquisition of Praxis Engineering by CSRA, the $370 million purchase of Kee Safety by Investcorp, the $760 million acquisition of BluePay by FirstData, the $582 million sale of Noble Group’s US oil liquids business to Vitol, the $1.9 billion acquisition of BroadSoft by Cisco, TPG’s $625 million purchase of Exactech, the $450 million sale of NuTonomy to Delphi Automotive, the $1.9 billion merger of Strayer Education and Capella Education, Lennar’s $9.3 billion purchase of CalAtlantic, and the acquisition of 49% of the Brooklyn Nets by Joseph Tsai at a valuation of $2.3 billion.
Developed market equities were higher in October (see page 8), with the largest gains in Japan (+5.6%), Australia (+3.8%), and Germany (+3%); the worst performing were Italy (+0.1%), Hong Kong (+0.3%), and Spain (+1.6%).  US small caps underperformed large caps, with the Russell 2000 up 0.9% and the Russell 1000 up 2.3% (see page 3).  IT (+7.8%), Utilities (+3.9%), and Materials (+3.9%) were the best performing sectors in October, while Telecom (-7.6%), Consumer Staples (-1.4%), and Healthcare (-0.8%) were the worst performing (see page 2).  Large cap value (+0.7%) underperformed large cap growth (+3.9%) in October (see page 3).  Emerging market equities were mostly higher in October (see page 9), with the biggest gains in India (+6.5%), Korea (+6%), and Taiwan (+5.8%); Mexico (-2.6%), Russia (-0.8%), and Malaysia (flat) were the worst performing. 
In currencies, the USD Index was up 1.6% in October (see page 10).  The weakest developed market currencies against the USD were the New Zealand Dollar (-5%), Canadian Dollar (-3.3%), and Swiss Franc (-3%).  Emerging market currencies were mixed against the USD, with the biggest gains in the Korean Won (+2.4%), Indian Rupee (+1%), and Taiwan Dollar (+0.5%) and losses in the Turkish Lira (-6%), Mexican Peso (-4.7%), and South African Rand (-4%).
The US Treasury yield curve shifted higher in October (see page 12).  10 year rates closed the month at 2.38%, up from 2.33% at September month end.  Investment grade and high yield credit spreads tightened in October (see page 13).
In commodities, the GSCI index was up 3.8% in October (see page 11), with gains in Livestock (+9.6%), Energy (+4.9%), and Industrial Metals (+4.4%) and losses in Agriculture (-1.7%) and Precious Metals (-0.9%).  Within individual commodities, Lean Hogs (+13.5%), Gasoline (+10.1%), and Live Cattle (+9.1%) saw the biggest gains, while Natural Gas (-9.1%), Wheat (-6.5%), and Corn (-2.6%) saw the biggest losses.  Gold was down 1% for the month.

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Monday, October 2, 2017

September 2017 - Monthly Market Commentary

September was a fairly strong month for global risk assets.  Developed and emerging market equities were mostly higher, with small cap and value outperformance in the US, the USD strengthened, oil rebounded, and credit spreads were little changed.  At a news conference early in the month, ECB chief Draghi indicated that the central bank had discussed options for reducing stimulus in 2018 as Eurozone growth strengthened and inflation showed signs of picking up.  Later in the month, the Fed indicated that it was on track for one more rate hike in 2017 and, in a unanimous decision, that it would begin reducing the size of its balance sheet in October.  The US job report showed that 156,000 non-farm jobs were added in August, the unemployment rate ticked higher to 4.4%, and the labor force participation rate remained at 62.9%. 
Notable corporate transactions announced in September included the $23 billion acquisition of Rockwell Collins by United Technologies, Nasdaq’s $705 million acquisition of eVestment., the $1.1 billion purchase of NeoTract by Teleflex, the $305 million sale of Blue River Technology to Deere & Co, Fortive’s $770 million acquisition of Landauer, CEFC’s $9.1 billion purchase of a 14.16% stake in Rosneft from Glencore and the QIA, the $7.8 billion purchase of Orbital ATK by Northrop Grumman, the $328 million acquisition of R2Net by Signet Jewelers from Francisco Partners, Google’s $1.1 billion purchase of a stake in HTC, the $3.5 billion purchase of Ash Grove Cement by CRH plc, Genuine Parts’ $2 billion acquisition of Alliance Automotive Group, the $2.6 billion acquisition of GE’s industrial solutions group to ABB Ltd, the $2.7 billion sale of Carver to Unilever, the $5.3 billion acquisition of Nets by a consortium led by Hellman & Friedman, the merger of Siemen’s rail operations with Alstom, and the $17.7 billion acquisition of Toshiba’s memory chip unit to a group led by Bain Capital.
Developed market equities were mostly higher in September (see page 8), with the largest gains in Germany (+6.2%), France (+4.9%), and Japan (+4.3%); the worst performing were the UK (-0.8%), Hong Kong (-0.5%), and Australia (flat).  US small caps outperformed large caps, with the Russell 2000 up 6.2% and the Russell 1000 up 2.1% (see page 3).  Energy (+9.9%), Financials (+5.1%), and Industrials (+4%) were the best performing sectors in September, while Utilities (-2.7%), Real Estate (-1.4%), and Consumer Staples (-0.9%) were the worst performing (see page 2).  Large cap value (+3%) outperformed large cap growth (+1.3%) in September (see page 3).  Emerging market equities were mostly higher in September (see page 9), with the biggest gains in Argentina (+10.3%), Brazil (+4.8%), and Russia (+3.7%); Taiwan (-2.9%), Mexico (-1.8%), and India (-1.6%) were the worst performing. 
In currencies, the USD Index was up 0.4% in September (see page 10).  The strongest developed market currency against the USD was the British Pound (+3.6%); the worst performing were the Swedish Krona (-2.5%), Norwegian Krone (-2.5%), and Japanese Yen (-2.3%).  Emerging market currencies were mostly weaker against the USD, with the biggest gains in the Malaysian Ringgit (+1.1%) and Russian Ruble (+0.9%) and losses in the South African Rand (-4.1%), Turkish Lira (-3.1%), and Indian Rupee (-2.1%).
The US Treasury yield curve shifted higher in September (see page 12).  10 year rates closed the month at 2.33%, up from 2.12% at August month end.  Investment grade and high yield credit spreads were little changed in September (see page 13).
In commodities, the GSCI index was up 3.3% in September (see page 11), with gains in Energy (+5.9%), Livestock (+4.3%), and Agriculture (+0.1%) and losses in Precious Metals (-3%) and Industrial Metals (-2.7%).  Within individual commodities, Crude Oil (+8.3%), Brent Crude (+8%), and Feeder Cattle (+7.6%) saw the biggest gains, while Platinum (-8.6%), Gasoline (-7.6%), and Sugar (-5.6%) saw the biggest losses.  Gold was down 2.7% for the month.

Contact CurAlea Associates for a Daily Market Review.

Friday, September 1, 2017

August 2017 - Monthly Market Commentary

August was a mixed month for global risk assets.  Developed market equities were mixed, with large cap and growth outperformance in the US, emerging market equities were mostly higher, the USD was unchanged, commodities were mixed, and credit spreads widened.  Minutes from the July Fed meeting showed a split amongst officials regarding the timing of the next interest rate increase due to persistently low inflation, though there appeared to be consensus for a September start to a reduction in the Fed’s balance sheet.  The annual Jackson Hole central banker meeting produced little insight into the monetary plans of the major central banks.  The US job report showed that 209,000 non-farm jobs were added in July, the unemployment rate ticked lower to 4.3%, and the labor force participation rate rose slightly to 62.9%. 
Notable corporate transactions announced in August included the $1.6 billion sale of sPower by Fir Tree to AES and AIMCo, KKR’s $1.4 billion acquisition of PharMerica Corp., the $3.3 billion purchase of CH2M Hill Cos by Jacobs Engineering, the $1.2 billion sale of the communities and sports division of Active Network to Global Payments, DigiCert’s $950 million acquisition of Symantec’s website security business, the acquisition of Tronox’s alkali business by Genesis Energy for $1.3 billion, the $2.4 billion purchase of American Medical Response by American Medical Group, the $11 billion merger of Invitation Homes and Starwood Waypoint, the $1 billion purchase of Transplace by TPG Capital, Transocean’s $3.4 billion acquisition of Songa Offshore, the $1.5 billion acquisition of DuPage Medical Group by Ares Management, the $325 million sale of Prudential’s US broker dealer network to LPL Financial, the $5.6 billion acquisition of Calpine by Energy Capital Partners, the $4.95 billion purchase of Maersk Oil by Total, the $9.45 billion acquisition of Oncor by Sempra Energy, Cisco’s $320 million purchase of Springpath, Japan Tobacco’s $936 million purchase of Mighty, the $2.6 billion acquisition of CRH’s US distribution arm by Beacon Roofing, the purchase of Kite Pharma by Gilead Sciences for $11 billion, Leonard Green’s $3.1 billion purchase of CPA Global, and the $1.55 billion acquisition of Advisory Board’s education business by Vista Energy.
Developed market equities were mixed in August (see page 8), with the largest gains in Hong Kong (+1.9%), the UK (+1.5%), and Italy (+1%); the worst performing were Spain (-2%), Germany (-0.6%), and Japan (-0.4%).  US small caps underperformed large caps, with the Russell 2000 down 1.3% and the Russell 1000 up 0.3% (see page 3).  IT (+3.5%), Utilities (+3.3%), and Health Care (+1.8%) were the best performing sectors in August, while Energy (-5.2%), Telecom (-3%), and Consumer Discretionary (-1.8%) were the worst performing (see page 2).  Large cap value (-1.2%) underperformed large cap growth (+1.8%) in August (see page 3).  Emerging market equities were mostly higher in August (see page 9), with the biggest gains in Argentina (+11.1%), Brazil (+7%), and Russia (+5%); Korea (-1.7%), India (-1.1%), and the Philippines (-1%) were the worst performing. 
In currencies, the USD Index was down 0.2% in August (see page 10).  The strongest developed market currencies against the USD were the Swedish Krona (+1.6%), Norwegian Krone (+1.3%), and Swiss Franc (+0.9%); the worst performing were the New Zealand Dollar (-4.4%), British Pound (-2.2%), and Australian Dollar (-0.7%).  Emerging market currencies were mostly stronger against the USD, with the biggest gains in the Russian Ruble (+3%), Chinese Yuan (+2%), and Turkish Lira (+1.9%) and losses in the Brazilian Real (-0.7%), Korean Won (-0.5%), and Mexican Peso (-0.5%).
The US Treasury yield curve shifted lower in August (see page 12).  10 year rates closed the month at 2.12%, down from 2.29% at July month end.  Investment grade and high yield credit spreads widened in August (see page 13).
In commodities, the GSCI index was down 0.8% in August (see page 11), with gains in Industrial Metals (+8.6%), Precious Metals (+4%), and losses in Agriculture (-7.4%), Livestock (-5.4%), and Energy (-0.3%).  Within individual commodities, Gasoline (+12.7%), Aluminum (+10.4%), and Natural Gas (+7.6%) saw the biggest gains, while Wheat (-13.6%), Coffee (-9.3%), and Corn (-7%) saw the biggest losses.  Gold was up 3.9% for the month.

Contact CurAlea Associates for a Daily Market Review.

Tuesday, August 1, 2017

July 2017 - Monthly Market Commentary

July was a strong month for global risk assets.  Global equities moved higher, with large cap and growth outperformance in the US, the USD weakened, the oil complex moved sharply higher, and credit spreads tightened.  Early in the month, minutes from the June Fed meeting showed that Fed officials were readying plans to start shrinking the central bank’s balance sheet “within a couple of months”.  Later in the month, at their Open Market Committee meeting, the Fed left rates unchanged and said the balance sheet reduction could begin “relatively soon”.  At its own meeting, the ECB left its monetary policy unchanged, and indicated that it would further discuss its quantitative easing program in the fall.  The BOJ, meanwhile, pushed back (for the sixth time) by a year the date when inflation in Japan should hit 2%.  Late in the month, the Commerce Department reported that US GDP grew at an annualized rate of 2.6% in the second quarter.  The US job report showed that 222,000 non-farm jobs were added in June, the unemployment rate ticked higher to 4.4%, and the labor force participation rate rose slightly to 62.8%. 
Notable corporate transactions announced in July included the $875 million sale of Stonyfield by Danone to Lactalis, Monomoy Capital’s $338 million acquisition of West Marine, the $3 billion purchase of Monogram Residential Trust by Greystar Real Estate Partners, the $10 billion merger of Worldpay and Vantiv, EQT’s $875 million acquisition of Global Gateway South, the acquisition of Ambry Genetics by Konica Minolta for $1 billion, the $605 million purchase of Lloyd’s of London insurer Novae by Axis Capital, the $1.24 billion acquisition of Bankrate by Red Ventures, the $2.1 billion merger of QVC and HSN, Campbell Soup’s $700 million acquisition of Pacific Foods, the $1,1 billion acquisition of ClubCorp by Apollo Global Management, the $1.4 billion sale of Halcon Resources’ Williston Basin assets to Bruin E&P Partners, the $1.1 billion acquisition of Dow Chemical’s corn seed business in Brazil by a unit of CITIC, the $1.25 billion purchase of GCA Services by ABM, the $1.3 billion acquisition of Constantia Flexibles by Multi-Color, the Washington Companies’ $1.2 billion purchase of Dominion Diamond, Church & Dwight’s $1 billion purchase of Water Pik, the $7.1 billion acquisition of Lightower by Crown Castle, the purchase of Reckitt Benckiser’s food division by McCormick for $4.2 billion, Hydro One’s $5.3 billion purchase of Avista, the $2.8 billion acquisition of WebMD by KKR, the $6 billion purchase of Nature’s Bounty by KKR from Carlyle Group, Michael Kors’ $1.2 billion acquisition of Jimmy Choo, Laboratory Corp’s $1.2 billion purchase of Chiltern, and Discovery’s $14.6 billion acquisition of Scripps Networks.
Developed market equities were mostly higher in July (see page 8), with the largest gains in Italy (+3.8%), Hong Kong (+3.8%), and the S&P500 (+2%); the worst performing were Germany (-1.5%), France (-0.5%), and Canada (+0.1%).  US small caps underperformed large caps, with the Russell 2000 up 0.7% and the Russell 1000 up 2% (see page 3).  Telecom (+6.4%), IT (+4.3%), and Energy (+2.5%) were the best performing sectors in July, while Industrials (+0.1%), Consumer Staples (+0.6%), and Health Care (+0.8%) were the worst performing (see page 2).  Large cap value (+1.3%) underperformed large cap growth (+2.7%) in July (see page 3).  Emerging market equities were mostly higher in July (see page 9), with the biggest gains in China (+8.9%), India (+6.9%), and Russia (+5.4%); Argentina (-6.8%), Malaysia (-0.1%), and Indonesia (+0.2%) were the worst performing. 
In currencies, the USD Index was down 2.9% in July (see page 10).  The strongest developed market currencies against the USD were the Norwegian Krone (+6.2%), Swedish Krona (+4.5%), and Australian Dollar (+4.1%); the Swiss Franc was down 0.9%.  Emerging market currencies were mostly stronger against the USD, with the biggest gains in the Brazilian Real (+5.8%), Korean Won (+2.3%), and Mexican Peso (+1.8%) and losses in the Russian Ruble (-2.3%) and South African Rand (-0.7%).
The US Treasury yield curve was little changed in July (see page 12).  10 year rates closed the month at 2.29%, down slightly from 2.31% at June month end.  Investment grade and high yield credit spreads tightened in July (see page 13).
In commodities, the GSCI index was up 4.6% in July (see page 11), with gains in Energy (+8.1%), Industrial Metals (+3.4%), and Precious Metals (+1.9%), and losses in Agriculture (-0.9%) and Livestock (-4.2%).  Within individual commodities, Gasoline (+12.4%), Heating Oil (+12.2%), and Coffee (+10.9%) saw the biggest gains, while Wheat (-9.7%), Natural Gas (-7.6%), and Lean Hogs (-6.3%) saw the biggest losses.  Gold was up 2% for the month.

Contact CurAlea Associates for a Daily Market Review.

Wednesday, July 5, 2017

Monday, July 3, 2017

June 2017 - Monthly Market Commentary

June was a decent month for global risk assets.  Global equities were mixed, with small cap and value outperformance in the US, the USD weakened, the US interest rate curve continued to flatten, commodities were mixed, and credit spreads widened slightly.  Early in the month, the ECB unveiled better economic forecasts and indicated that it was unlikely to cut interest rates again in this cycle.  Election results in England delivered a setback for Prime Minister May, as Conservatives were left short of a majority in Parliament, resulting in greater uncertainty as Brexit negotiations unfold.  The Federal Reserve increased interest rates to a range of 1-1.25%, and detailed plans to begin reducing its balance sheet later this year.  Late in the month, BOE Governor Carney indicated that interest rates in the UK may need to increase, contributing to a selloff in government bonds.  The US job report showed that 138,000 non-farm jobs were added in May, the unemployment rate ticked lower to 4.3% (a 16 year low), and the labor force participation rate fell slightly to 62.7%. 
Notable corporate transactions announced in June included the $4.9 billion purchase of Wirtgen Group by Deere, CIC’s $13.6 billion acquisition of Logicor from Blackstone, the $564 million purchase of Xactly by Vista Equity Partners, CD&R’s $2.5 billion acquisition of Waterworks from HD Supply Holding, the acquisition of Banco Popular by Banco Santander for one euro, the $930 million purchase of iNova Pharmaceuticals by the Carlyle Group and Pacific Equity Partners, the $605 million acquisition of SciClone Pharmaceuticals by a group led by GL Capital, Digital Realty Trust’s $5 billion acquisition of Dupont Fabros Technology, the $735 million sale of Encana’s Piceance natural gas assets to Caerus Oil and Gas, Atairos Group’s $1 billion acquisition of Bowlmor AMF, the $13.7 billion purchase of Whole Foods by Amazon, Walmart’s $310 million acquisition of Bonobos, the $5 billion purchase of Parexel by Pamplona Capital, the $1 billion acquisition of Casamigos by Diageo, Repligen’s $359 million purchase of Spectrum, Martin Marietta’s $1.6 billion purchase of Bluegrass Materials, the $1.4 billion acquisition of First Potomac Realty Trust by Government Properties, the purchase of Spectranetics by Philips for $2.2 billion, Sycamore Partners’ $6.9 billion purchase of Staples, the $1.8 billion sale of Visma by KKR to a group led by HgCapital, and Blackstone’s $650 million acquisition of Croesus Retail Trust.
Developed market equity markets were mixed in June (see page 8), with the largest gains in Japan (+2.7%), Hong Kong (+0.8%), and the S&P500 (+0.6%); the worst performing were Spain (-2.8%), France (-2.7%), and the UK (-2.5%).  US small caps outperformed large caps, with the Russell 2000 up 3.5% and the Russell 1000 up 0.7% (see page 3).  Financials (+6.4%), Healthcare (+4.6%), and Real Estate (+1.9%) were the best performing sectors in June, while Telecom (-2.9%), IT (-2.7%), and Utilities (-2.7%) were the worst performing (see page 2).  Large cap value (+1.6%) outperformed large cap growth (-0.3%) in June (see page 3).  Emerging Market equities were mostly higher in June (see page 9), with the biggest gains in Taiwan (+5.2%), Korea (+3.2%), and Indonesia (+2.7%); Argentina (-3.5%), India (-0.6%), and Russia (-0.3%) were the worst performing. 
In currencies, the USD Index was down 1.3% in June (see page 10).  The strongest developed market currencies against the USD were the Canadian Dollar (+4.1%), New Zealand Dollar (+3.5%), and Australian Dollar (+3.5%); the Japanese Yen was down 1.4%.  Emerging market currencies were mixed against the USD, with the biggest gains in the Mexican Peso (+2.7%), Singapore Dollar (+0.5%), and Thai Baht (+0.4%) and losses in the Russian Ruble (-3.1%), Brazilian Real (-2.5%) and Korean Won (-2.3%).
The US Treasury yield curve flattened in June (see page 12).  10 year rates closed the month at 2.31%, up from 2.20% at May month end.  Investment grade and high yield credit spreads widened in June (see page 13).
In commodities, the GSCI index was down 1.9% in June (see page 11), with gains in Agriculture (+3.3%) and Industrial Metals (+3.2%) and losses in Energy (-4.3%), Precious Metals (-2.8%), and Livestock (-2%).  Within individual commodities, Wheat (+18.8%), Copper (+4.5%), and Soybeans (+3.6%) saw the biggest gains, while Sugar (-8.4%), Cotton (-7.1%), and Cocoa (-6.4%) saw the biggest losses.  Gold was down 2.5% for the month.

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Monday, June 26, 2017

Number of Trading Days with SPX Moves > 2%

Halfway through 2017, there have been zero days with an intraday SPX move of 2% or more.

Source: Credit Suisse