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

Thursday, October 1, 2015

September 2015 - Monthly Market Commentary

September was another difficult month for global risk assets.  Global equities continued to sell off, the US Dollar strengthened versus most developed and emerging market currencies, credit spreads widened, and crude oil resumed its decline.  Risk appetite remained weak in September as investors continued to fret about weakness in the Chinese economy; policy makers seemed to share this concern as Fed Chairwoman highlighted in the news conference following the Fed’s decision to keep interest rates unchanged at their September meeting.  Earlier in the month, the US job report showed 173,000 jobs were added in August, while the unemployment rate dropped to 5.1% and the labor force participation rate remained at 62.6%, a 38 year low. 
Notable corporate transactions announced in September included Blackberry’s $425 million purchase of Good Technology, Emera’s $6.5 billion acquisition of Teco Energy, Tesco’s sale of its South Korean operations to MBK Partners for $6.1 billion, Media General’s $2.4 billion purchase of Meredith Corp., Blackstone’s $4 billion purchase of Strategic Hotels, Altice’s $17.7 billion purchase of Cablevision, Dialog Semiconductor’s $4.6 billion acquisition of Atmel, BBA Aviation’s $2 billion purchase of Landmark Aviation from the Carlyle Group, Alcoa‘s decision to split into two publicly traded companies, Energy Transfer Equity’ $37.7 billion acquisition of the Williams Companies, IBM’s acquisition of Meteorix, and Japan Tobacco’s purchase of the overseas rights of Reynold American’s Natural American Spirit brand.
Developed market equity markets were lower in September (see page 8) as Spain (-7.6%), Japan (-6.8%), and Germany (-6.2%) saw the biggest losses.  US small caps underperformed, with the Russell 2000 down 4.9% and the S&P500 down 2.5% (see page 2).  Materials (-7.4%), Energy (-6.7%), and Healthcare (-5.7%) were the worst performing sectors in September, while Utilities (+2.9%), Consumer Staples (+0.5%), and Consumer Discretionary (-0.6%) were the best performing (see page 2).  Large cap growth (-2.5%) outperformed large cap value (-3%) in September (see page 3).  Emerging Market equities were mostly lower in September (see page 9), with the biggest losses in Argentina (-17.4%), Indonesia (-9.4%), and Russia (-5.6%); Korea (+2%), Malaysia (+1.3%), and India (-0.8%) were the best performing. 
In currencies, the USD Index strengthened 0.5% in September (see page 10).  The weakest developed market currencies against the USD were the Norwegian Krone (-2.8%), British Pound (-1.4%), and Australian Dollar (-1.3%), while the Swedish Krona (+1.2%), Japanese Yen (+1.1%), and New Zealand Dollar (+0.9%) strengthened against the USD.  The USD was stronger against most emerging market currencies with the biggest losses seen in the Brazilian Real (-8.3%), Malaysian Ringgit (-4.8%), and the South African Rand (-4.2%) (see page 10); the Indian Rupee (+1.3%) and Chinese Yuan (+0.3%) strengthened versus the USD.
US Treasury yields moved lower in September across the curve (see page 12).  10 year rates closed the month at 2.06%, down from 2.21% at August month end.  Investment grade and high yield credit spreads widened sharply in September (see page 13).
In commodities, the GSCI index was down -6.3% in September (see page 11), with losses in Energy (-10%), Livestock (-6.3%), Precious Metals (-1.4%), and Industrial Metals (-1.4%) and gains in Agriculture (+3.1%).  Within individual commodities, Brent Crude (-12.3%), Feeder Cattle (-11.7%), and Heating Oil (-10.7%) led losses, while Sugar (+11.5%), Palladium (+8.1%), and Lean Hogs (+5.8%) moved higher; Gold was down -1.5%.
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