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Wednesday, December 13, 2017

Year End 2017

Another year is ending, seventeen is in the books,
Before moving to the passing lane, let’s take some rearview looks.
Let’s review who’s made the news, every hero and every chump,
And take stock of where we are, a year into the reign of Trump.
We’ve had some ups and downs, of some things we are not proud,
Like the challenge some had measuring, the tiny inauguration crowd.
With my rhymes now please bear with me, your patience I do beseech,
Sit back now and relax, like Christie on a shut down beach.

The eclipse was pretty awesome, moving from northwest down to southeast,
Love or hate that guy Tom Brady, that Super Bowl comeback was pretty beast.
Sexual misconduct allegations, men abusing positions of power,
Weinstein, Franken, O’Reilly, Moore, Rose, Spacey, and Lauer.
Catalonia voted for secession, alas the Spaniards took it back,
Too bad Equifax can’t do that, with your personal info lost in the hack.
The women marched on Washington, with quite a large turnout,
The Astros won in seven, the Warriors won in a rout.

Bad news we had aplenty, always on terror high alert,
Trucks driving into people, bombs at a Manchester concert.
Migrants fleeing into Europe, refugees pouring out of Burma,
Hurricanes smashing the Carribean, Maria, Harvey, Nate and Irma.
Maduro in Venezuela, Kim Jong-Un and other kooks,
Destroying their own countries, or hell bent on having nukes.
Destruction in Aleppo, a double California fire outbreak,
Mass shootings in Vegas and Texas, a Mexican earthquake.

Goodbye we said to many, without them empty we may feel,
Chuck Berry rolled over Beethoven, Monte Hall taught us how to make a deal.
David Cassidy and Jerry Lewis, of you we were quite fond,
Hugh Hefner was our playboy, Roger Moore was our James Bond.
Sam Shephard and Tom Petty, Lil Peep and Fats Domino.
The psychopath Charles Manson, no one’s sad to see him go.
The diplomat Zbigniew Brzezinski, we never could pronounce your name,
The chancellor Helmut Kohl, reuniting Germany brought you fame.

The first year of the administration, an interesting one it’s been,
Few legislative victories, but a guilty plea from Flynn.
The Russia thing’s a mess, always another strange plot twist,
Manafort, Gates, and Papadopolous, on Mueller’s naughty list.
Price, Preibus and Steve Bannon, not one a year did survive,
Scaramucci had his day, well to be accurate he lasted five.
Comey from his post ejected, for excessive investigatory intervening,
Before resigning I wish that Spicer, had explained covfefe’s meaning.

Our country is divided, the left against the right,
Every issue that’s debated, ends up a bitter fight.
All you nutty fringe extremists, on both sides of the aisle,
Put your country before your party, and stop being so hostile.
Enough with the shouting and the violence, don’t get all up in my grill,
Please stop all of this chaos, we don’t want another Charlottesville.
Our country isn’t perfect, we have many problems that do displease,
But to the NFL you’ve made your point, it’s time to get up off your knees.

The markets have been bullish, with synchronized global growth,
To short every little vol spike, we all have now taken an oath.
Credit spreads have tightened, the momentum trade has been astounding,
US short rates have moved higher, dollar weakness has been confounding.
The yield curve it has flattened, emerging markets all have rallied,
Large cap growth stocks are on top, a winning year they’ve tallied.
But the winner of them all, has been the bitcoin and the crypto,
They’ve sprinted ever higher, this is no walk, or jog, or tiptoe.

So the New Year is upon us, it’s getting really close,
Please put down all those opioids, you don’t need another dose.
In eighteen please stay alert, I don’t think it will be boring,
Vol may just make a comeback, you don’t want to be caught snoring.
A new Fed chair’s taking charge, as the balance sheet is shrinking,
Of buying every dip, you may want to do some fast rethinking.
With your gains this holiday season, be generous and don’t be chintzy,
Be charitable with your winnings, and don’t spend $450 million on a da Vinci.

Friday, December 1, 2017

November 2017 - Monthly Market Commentary

November was a mixed month for global risk assets.  Developed and emerging market equities were mixed, the USD weakened, the US yield curve continued to flatten, the oil complex moved higher, and high yield credit spreads widened slightly.  The Federal Reserve left rates unchanged at its November 1 meeting with no surprises in its statement; minutes from the meeting reinforced expectations for an additional rate hike in December.  For the first time in a decade, the Bank of England raised its benchmark interest rate, but signaled that any additional tightening would be gradual.  The US job report showed that 261,000 non-farm jobs were added in October, the unemployment rate fell to 4.1%, and the labor force participation rate fell to 62.7%. 
Notable corporate transactions announced in November included the $780 million purchase of full control of the Kirin-Amgen joint venture by Amgen, Permira’s $1.75 billion acquisition of Duff & Phelps, the $384 million purchase of Tazo tea from Starbucks by Unilever, the $950 million acquisition of a majority stake in AmTrust Financial’s US based fee business by Madison Dearborn, Synopsys Inc’s $565 million purchase of Black Duck Software, Leonard Green’s $843 million acquisition of Pure Gym, Total’s $2 billion purchase of Engie SA’s LNG business, James Hardie’s $548 million purchase of Fermacell from Xella International, the $1 billion purchase of Musical.ly by Beijing Bytedance Technology, the acquisition of ShyaHsin Packaging by Blackstone for between $800-900 million, B.Riley Financial’s $143 million purchase of magicJack VocalTec, the $6 billion purchase of Cavium by Marvell Technology, AmerisourceBergen’s $815 million acquisition of H.D. Smith, the $1.9 billion merger of Stone Energy and Talos Energy, the $1.85 billion purchase of Time Inc. by Meredith, the $875 million acquisition of SeaStar Solutions by Dometic Group, the $2.9 billion purchase of a major stake in Sun Art Retail Group by Alibaba, the $425 million acquisition of Care Investment Trust by Mainstreet, Thoma Bravo’s $1.6 billion purchase of Barracuda, the $1.2 billion sale of Inkia Energy to I Squared Capital, the $521 million acquisition of Bazaarvoice by Marlin Equity, the $300 million purchase of Wall Street English by Baring Private Equity and CITIC Capital, Unilver’s acquisition of Sundial Brands, and the $2.9 billion acquisition of Buffalo Wild Wings by Roark Capital.
Developed market equities were mixed in November (see page 8), with the largest gains in Hong Kong (+3.5%), the S&P500 (+3%), and Australia (+1.5%); the worst performing were Spain (-2.9%), France (-2.1%), and Italy (-1.9%).  US small caps performed roughly in line with large caps, with the Russell 2000 up 2.9% and the Russell 1000 up 3% (see page 3).  Telecom (+6%), Consumer Staples (+5.7%), and Consumer Discretionary (+5.1%) were the best performing sectors in November, while Materials (+1%), IT (+1.1%), and Energy (+1.8%) were the worst performing (see page 2).  Large cap value (+3.1%) slightly outperformed large cap growth (+3%) in November (see page 3).  Emerging market equities were mostly lower in November (see page 9), with the biggest gains in Russia (+3.5%), China (+1.6%), and Thailand (+0.1%); Argentina (-4.7%), Taiwan (-3.8%), and Mexico (-3.2%) were the worst performing. 
In currencies, the USD Index was down -1.6% in November (see page 10).  The Norwegian Dollar was down (-1.8%) against the USD, while the strongest currencies against the USD were the Euro (+2.2%), British Pound (+1.8%), and Swiss Franc (+1.4%).  Emerging market currencies were mostly stronger against the USD, with the biggest gains in the Malaysian Ringgit (+3.5%), South African Rand (+3%), and Korean Won (+2.8%) and losses in the Turkish Lira (-3.3%) and Russian Ruble (-0.2%).
The US Treasury yield curve flattened in November (see page 12).  10 year rates closed the month at 2.41%, up from 2.38% at October month end, while 1 year rates widened 19bps during the month.  Investment grade spreads were little changed and high yield credit spreads widened in November (see page 13).
In commodities, the GSCI index was up 1.4% in November (see page 11), with gains in Energy (+3.4%) and Agriculture (+0.5%), and losses in Industrial Metals (-3.2%) and Livestock (-5.5%); Precious Metals were flat.  Within individual commodities, Cotton (+6.3%), Crude Oil (+5.2%), and Palladium (+3.3%) saw the biggest gains, while Lean Hogs (-7.8%), Aluminum (-5.4%), and Live Cattle (-5%) saw the biggest losses.  Gold was up 0.3% for the month.

Contact CurAlea Associates for a Daily Market Review.

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.

Contact CurAlea Associates for a Daily Market Review.

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 

Thursday, June 1, 2017

May 2017 - Monthly Market Commentary

May was a strong month for global risk assets.  Global equities were mostly higher with continued outperformance outside of the US and by growth stocks within US markets, the USD weakened, the US interest rate curve continued to flatten, commodities were mixed, and credit spreads were little changed.  Early in the month, the Fed left interest rates unchanged and indicated that two more rate hikes were likely later this year in June and September, while the Fed minutes indicated that officials were moving towards a consensus to begin reducing the central bank’s balance sheet later this year.  Concerns over Congress’ ability to agree on a debt ceiling increase have caused some to question the likelihood of the second rate hike in September.  Emmanuel Macron won the French Presidential election with almost two-thirds of the vote, providing a boost to European stocks and the pro-EU establishment.  The Bank of England left interest rates and its QE program unchanged and indicated that if Brexit negotiations proceed smoothly, it may start to increase rates in response to rising inflation.  The US job report showed that 211,000 non-farm jobs were added in April, the unemployment rate ticked lower to 4.4%, and the labor force participation rate fell slightly to 62.9%. 
Notable corporate transactions announced in May included the $875 million purchase of Canam Group by the Dutil family and American Industrial Partners, IAC’s $500 million acquisition of Angie’s List, the $600 million purchase of Viptela by Cisco, Sinclair Broadcast’s $3.9 billion acquisition of Tribune Media, the $2.4 billion acquisition of Kate Spade by Coach, DHX Media’s $345 million purchase of the entertainment division of Iconix Brand Group, KPS Capital’s $425 million acquisition of golf brands from Adiddas, Verizon’s $3.1 billion acquisition of Straight Path Communications, the $7.2 billion purchase of Patheon by Thermo Fischer Scientific, Moody’s $3.3 billion acquisition of Bureau van Dijk, the $560 million purchase of Pittsburgh Corning by Owens Corning, Spectrum Brand’s $225 million acquisition of PetMatrix, the $14 billion merger of Huntsman and Clariant, the $446 million acquisition of Nutraceutical by HGGC, CF Corp’s $1.84 billion purchase of Fidelity & Guaranty, LSE’s $685 million purchase of Citigroup’s analytics and fixed income index operations, and First Data’s $750 million purchase of CardConnect.
Developed market equity markets were mostly higher in May (see page 8), with the largest gains in the UK (+4.8%), Hong Kong (+3.5%), and Japan (+2.2%); the worst performing were Australia (-3.5%), Canada (-1.4%), and Italy (+0.8%).  US small caps underperformed large caps, with the Russell 2000 down -2% and the Russell 1000 up 1.3% (see page 3).  IT (+4.4%), Utilities (+4.2%), and Consumer Staples (+2.9%) were the best performing sectors in May, while Energy (-3.4%), Financials (-1.2%), and Telecom (-1%) were the worst performing (see page 2).  Large cap growth (+2.6%) outperformed large cap value (-0.1) in May (see page 3).  Emerging Market equities were mostly higher in May (see page 9), with the biggest gains in Korea (+6.3%), Argentina (+6%), and China (+5.4%); Russia (-6.6%), Brazil (-3.7%), and Mexico (-1.1%) were the worst performing. 
In currencies, the USD Index was down 2.1% in May (see page 10).  The strongest developed market currencies against the USD were the Euro (+3.2%), New Zealand Dollar (+3.2%), and Swiss Franc (+2.8%); the weakest were the Australian Dollar (-0.8%) and British Pound (-0.5%).  Emerging market currencies were mostly higher against the USD, with the biggest gains in the Chinese Yuan (+2.2%), South African Rand (+2.2%), and Korean Won (+1.6%) and losses in the Brazilian Real (-1.5%) and Indian Rupee (-0.3%).
The US Treasury yield curve flattened in May (see page 12).  10 year rates closed the month at 2.20%, down from 2.28% at April month end.  Investment grade and high yield credit spreads were little changed in May (see page 13).
In commodities, the GSCI index was down 1.5% in May (see page 11), with gains in Livestock (+4.4%) and Precious Metals (+0.4%) and losses in Energy (-2.6%), Agriculture (-1.7%), and Industrial Metals (-0.3%).  Within individual commodities, Lean Hogs (+12.1%), Cocoa (+11.3%), and Gasoline (+3%) saw the biggest gains, while Natural Gas (-8.6%), Sugar (-7.7%), and Soybeans (-4.1%) saw the biggest losses.  Gold was up 0.4% for the month.

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Monday, May 1, 2017

April 2017 - Monthly Market Commentary

April was a fairly strong month for global risk assets.  Global equities were mostly higher with continued outperformance outside of the US and by growth stocks within US markets, the USD weakened, the US interest rate curve flattened, commodities were mostly lower with continued weakness in the energy complex, and credit spreads tightened.  Early in the month, the Fed minutes showed that the central bank would likely start reducing the size of its balance sheet later this year.  British Prime Minister May called for a surprise early general election for June 8 in a bid to solidify her position ahead of Brexit negotiations with the EU.  The ECB made no changes to interest rates or its bond buying program at its April meeting.  US GDP once again showed weak first quarter growth with a 0.7% annual growth rate, the slowest rate of expansion in three years.  The US job report showed that 98,000 non-farm jobs were added in March, the unemployment rate ticked lower to 4.5%, and the labor force participation rate remained at 63%. 
Notable corporate transactions announced in April included the $116 billion purchase of Convergex Group by Cowen Group, Liberty Interactive Corp’s $1.1 billion acquisition of General Communication, the $7.5 billion purchase of Panera Bread by JAB, Seven & I Holdings’ $3.3 billion acquisition of the Sunoco chain of gas stations, the $5 billion merger of Swift Transportation and Knight Transportation, AT&T’s $1.6 billion purchase of Straight Path Communications, RetailMeNot’s $630 million acquisition by Harland Clarke Holdings, the $1.2 billion purchase by Lowes Corp of Consolidated Container from Bain Capital, NuStar Energy’s $1.5 billion acquisition of Navigator Energy, the $660 million purchase of Pharmachem Laboratories by Ashland Global, Blackstone’s $2 billion acquisition of EagleClaw Midstream Ventures, the purchase of Focus Financial Partners by KKR and Stone Point Capital for an undisclosed price, Virtu Financial’s $1.4 billion acquisition of KCG Holdings, and LVMH’s $13 billion purchase of the remaining stake in Christian Dior.
Developed market equity markets were mostly higher in April (see page 8), with the largest gains in France (+3.5%), Hong Kong (+3.2%), and Spain (+2.7%); the worst performing were the UK (-1.3%), Italy (flat), and Canada (+0.4%).  US small caps performed in line with large caps, as both the Russell 2000 and the Russell 1000 were up 1.1% (see page 3).  IT (+2.5%), Consumer Discretionary (+2.4%), and Industrials (+1.8%) were the best performing sectors in April, while Telecom (-3.3%), Energy (-2.9%), and Financials (-0.8%) were the worst performing (see page 2).  Large cap growth (+2.3%) outperformed large cap value (-0.2%) in April (see page 3).  Emerging Market equities were higher in April (see page 9), with the biggest gains in the Philippines (+5.2%), Indonesia (+3.3%), and Korea (+2.8%); Thailand (+0.7%), Brazil (+0.7%), and Russia (+0.7%) were the worst performing. 
In currencies, the USD Index was down 1.3% in April (see page 10).  The strongest developed market currencies against the USD were the British Pound (+3.2%), Euro (+2.3%), and Swedish Krona (+1.3%); the weakest were the Canadian Dollar (-2.5%), New Zealand Dollar (-2%), and Australian Dollar (-1.8%).  Emerging market currencies were mostly higher against the USD, with the biggest gains in the Turkish Lira (+2.4%), Malaysian Ringgit (+1.9%), and Indian Rupee (+0.9%) and losses in the Korean Won (-1.8%), Brazilian Real (-1.7%) and Russian Ruble (-1.3%).
The US Treasury yield curve flattened in April (see page 12).  10 year rates closed the month at 2.28%, down from 2.39% at March month end.  Investment grade and high yield credit spreads tightened in April (see page 13).
In commodities, the GSCI index was down 2.1% in April (see page 11), with gains in Livestock (+8.6%) and Precious Metals (+0.6%) and losses in Energy (-3.6%), Industrial Metals (-3.1%), and Agriculture (-1.7%).  Within individual commodities, Feeder Cattle (+15.1%), Live Cattle (+11.9%), and Palladium (+3.6%) saw the biggest gains, while Cocoa (-12.9%), Gasoline (-9.1%), and Silver (-5.8%) saw the biggest losses.  Gold was up 1.4% for the month.

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Monday, April 3, 2017

March 2017 - Monthly Market Commentary

March was a mixed month for global risk assets.  Global equities were mostly higher with notable outperformance outside of the US, the USD weakened, the US interest rate curve flattened with a backup in rates at the short end, commodities were mostly lower with notable weakness in the energy complex, and credit spreads widened.  Early in the month, the ECB indicated that additional stimulus measures to boost economic growth and inflation in the Eurozone were less likely and left interest rates and its pace of bond purchases unchanged.  Mid-month, the Federal Reserve raised short term interest rates to a range between 0.75 - 1% and indicated that two more rates hikes were likely this year.  On March 29 British Prime Minister May formally began the UK’s process of leaving the EU, kicking off many years of Brexit negotiations.  The US job report showed that 235,000 non-farm jobs were added in February, the unemployment rate ticked lower to 4.7%, and the labor force participation rate moved up to 63%. 
Notable corporate transactions announced in March included the $2.3 billion sale of GM’s European operations to Peugeot and BNP Pribas, the $13.5 billion merger of Aberdeen Asset Management and Standard Life, the $1 billion acquisition of Nimble Storage by Hewlett Packard Enterprise, Intel’s $15 billion purchase of Mobileye, HNA Capital’s $450 million acquisition of a 25% stake in OM Asset Management, Amazon’s purchase of Souq.com for an undisclosed sum, the $4.3 billion sale of Onex’s USI Insurance unit to KKR and CDPQ, American Airlines’ $200 million purchase of a stake in China Southern Airlines, Apple’s acquisition of Workflow for an undisclosed sum, the $3.2 billion sale of Sealed Air’s New Diversey and food hygiene business to Bain Capital, China Energy’s $100 million purchase of a 19.9% stake in Cowen Group, the $13.3 billion sale of ConocoPhillips’ oil sands and western Canadian natural gas assets to Cenovus, MaxLinear’s $662 million purchase of Exar, an asset swap between DuPont’s crop protection business and FMC Corp’s health and nutrition business, the $555 million acquisition of TRC Companies by New Mountain Capital, and the $125 million sale of Sarepta’s Rare Pediatric Disease Priority Review Voucher to Gilead Sciences.
Developed market equity markets were mostly higher in March (see page 8), with the largest gains in Spain (+10.4%), Italy (+8.6%), and France (+5.6%); the worst performing were Japan (-0.8%), the S&P500 (+0.1%), and Canada (+1.1%).  US small caps performed in line with large caps, as both the Russell 2000 and the Russell 1000 were up 0.1% (see page 3).  IT (+2.6%), Consumer Discretionary (+2.1%), and Materials (+0.5%) were the best performing sectors in March, while Financials (-2.8%), Telecom (-1.2%), and Energy (-1%) were the worst performing (see page 2).  Large cap growth (+1.2%) outperformed large cap value (-1%) in March (see page 3).  Emerging Market equities were mostly higher in March (see page 9), with the biggest gains in Argentina (+12.8%), Indonesia (+4.3%), and Korea (+4.1%); Brazil (-2.5%), Russia (-0.8%), and Taiwan (+0.5%) were the worst performing. 
In currencies, the USD Index was down 0.8% in March (see page 10).  The strongest developed market currencies against the USD were the British Pound (+1.4%), Japanese Yen (+1.2%), and Swedish Krona (+0.7%); the weakest were the New Zealand Dollar (-2.6%) and Norwegian Krone (-2.4%).  Emerging market currencies were mostly higher against the USD, with the biggest gains in the Mexican Peso (+7.4%), Russian Ruble (+3.8%), and Indian Rupee (+3%) and losses in the South African Rand (-2.3%), Brazilian Real (-0.3%) and Chinese Yuan (-0.3%).
The US Treasury yield curve flattened in March with a backup in rates at the short end of the curve (see page 12).  10 year rates closed the month at 2.39%, unchanged from February month end.  Investment grade and high yield credit spreads widened in March (see page 13).
In commodities, the GSCI index was down 3.9% in March (see page 11), with gains in Livestock (+1.2%) and losses in Agriculture (-5.2%), Energy (-4.9%), Industrial Metals (-0.9%), and Precious Metals (-0.5%).  Within individual commodities, Natural Gas (+12.2%), Cocoa (+9.8%), and Feeder Cattle (+7.1%) saw the biggest gains, while Sugar (-12.8%), Soybeans (-8.6%), Platinum (-7.9%), and Crude Oil (-7.3%) saw the biggest losses.  Gold was down 0.4% for the month.

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Wednesday, March 1, 2017

February 2017 - Monthly Market Commentary

February was a strong month for global risk assets.  Developed and emerging market equities were mostly higher, the USD strengthened, the US interest rate curve flattened, commodities moved higher, and credit spreads tightened.  On the 1st of the month, the Federal Reserve left interest rates unchanged and indicated that it remained on track to gradually raise short term interest rates in 2017, while noting a recent increase in consumer confidence.  Later in the month at her Congressional testimony, Chair Yellen signaled that a rate increase in March was a possibility.  In the UK, the Bank of England also left interest rates unchanged.  The US job report showed that 227,000 jobs were added in January, the unemployment rate ticked higher to 4.8%, and the labor force participation rate ticked up to 62.9%. 
Notable corporate transactions announced in February included the $16.6 billion purchase of Mead Johnson Nutrition by Reckitt Benckiser, the $4.3 billion acquisition of Aon’s benefits outsourcing business to Blackstone, Allergan’s $2.5 billion acquisition of Zeltiq Aesthetics, Softbank’s $3.3 billion purchase of Fortress Investment Group, Restaurant Brands’ $1.6 billion acquisition of Popeyes Louisiana Kitchen, the $310 million purchase of Turn by Amobee, the ad tech division of Singtel, Tronox’s $1.7 billion purchase of Cristal, and Saudi Aramco’s $7 billion purchase of a stake in Petronas’ RAPID refinery project.
Developed market equity markets were higher in February (see page 8), with the largest gains in the S&P500 (+3.9%), the UK (+3.1%), and Australia (+2.4%); the worst performing were Canada (flat), Japan (+0.5%), and Italy (+1.4%).  US small caps underperformed large caps, with the Russell 2000 up 1.9% and the Russell 1000 up 3.9% (see page 3).  Health Care (+6.4%), Utilities (+5.3%), and Financials (+5.2%) were the best performing sectors in February, while Energy (-2.2%), Telecom (-0.4), and Materials (+0.7%) were the worst performing (see page 2).  Large cap growth (+4.2%) outperformed large cap value (+3.6%) in February (see page 3).  Emerging Market equities were mostly higher in February (see page 9), with the biggest gains in India (+4.1%), China (+3.6%), and Brazil (+3.2%); Russia (-8.5%), Mexico (-0.4%), and Thailand (-0.2%) were the worst performing. 
In currencies, the USD Index was up 1.6% in February (see page 10).  The strongest developed market currencies against the USD were the Australian Dollar (+0.9%) and Japanese Yen (flat); the weakest were the Swedish Krona (-3.3%), Euro (-2.1%), and Canadian Dollar (-2%).  Emerging market currencies were mostly higher against the USD, with the biggest gains in the Mexican Peso (+3.6%), Turkish Lira (+3.5%), and Russian Ruble (+3.1%) and losses in the Chinese Yuan (-0.4%) and Malaysian Ringgit (-0.2%).
The US Treasury yield curve flattened in February (see page 12).  10 year rates closed the month at 2.39%, down from 2.45% at January month end.  Investment grade and high yield credit spreads tightened in February (see page 13).
In commodities, the GSCI index was up 0.2% in February (see page 11), with gains in Precious Metals (+3.7%), Industrial Metals (+1.7%), and Livestock (+1.3%) and losses in Energy (-0.3%) and Agriculture (-0.2%).  Within individual commodities, Aluminum (+5.8%), Silver (+4.9%), and Gold (+3.6%) saw the biggest gains, while Natural Gas (-13.1%), Cocoa (-10.2%), and Coffee (-6.2%) saw the biggest losses.

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Wednesday, February 1, 2017

January 2017 - Monthly Market Commentary

January was a fairly strong month for global risk assets.  Developed and emerging market equities were mostly higher, the USD weakened, US interest rates were little changed, and commodities were mostly higher with the exception of the energy complex.  US GDP expanded at an annualized rate of 1.9% in the fourth quarter, roughly in line with the average rate since the end of the recession in 2009.  The ECB left both rates and its stimulus program unchanged.  In the UK, Brexit uncertainty continued as the British Supreme Court ruled that Parliament must vote on starting the Brexit process.  The US job report showed that 156,000 jobs were added in December, the unemployment rate ticked higher to 4.7%, the labor force participation rate ticked up to 62.7%, and wages increased by an annualized rate of 2.9%, the highest since 2009. 
Notable corporate transactions announced in January included the $2 billion sale of 80% of McDonald’s China business to Citic Capital and the Carlyle Group, the $2.3 billion purchase of Surgical Care Affiliates by UnitedHealth, Takeda Pharmaceutical’s $4.7 billion acquisition of Ariad Pharmaceuticals, Mars Inc’s $7.7 billion purchase of VCA, Valeant’s $1.3 billion sale of three skin care brands to L’Oreal and $820 million sale of its Dendreon cancer business to Sanpower, the $49 billion merger of Luxottica and Essilor International, Noble Energy’s $2.7 billion purchase of Clayton Williams Energy, BAT’s $49 billion deal to buy the remainder of Reynolds American, Safran’s $9 billion purchase of Zodiac Aerospace, the $3.7 billion acquisition of AppDynamics by Cisco., the $30 billion purchase of Actelion by Johnson & Johnson, the $880 million acquisition of MoneyGram by Ant Financial, the $980 million sale of Citigroup’s mortgage servicing business to New Residential, and Royal Dutch Shell’s $3.8 billion sale of much of its North Sea assets to Chrysaor and $900 million sale of its interest in a Thai gas field to Kuwait Foreign Petroleum Exploration Co.
Developed market equity markets were mostly higher in January (see page 8), with the largest gains in Hong Kong (+7.8%), the S&P500 (+1.9%), and Canada (+0.8%); the worst performing were Italy (-5.1%), France (-1.8%), and Australia (-0.5%).  US small caps underperformed large caps, with the Russell 2000 up 0.4% and the Russell 1000 up 2% (see page 3).  Materials (+4.6%), IT (+4.4%), and Consumer Discretionary (+4.2%) were the best performing sectors in January, while Energy (-3.6%), Telecom (-2.5%), and Real Estate (-0.1%) were the worst performing (see page 2).  Large cap growth (+3.4%) outperformed large cap value (+0.7%) in January (see page 3).  Emerging Market equities were mostly higher in January (see page 9), with the biggest gains in Argentina (+18.4%), Brazil (+7%), and China (+6.9%); Russia (-1.5%), Indonesia (-0.8%), and Malaysia (+1.8%) were the worst performing. 
In currencies, the USD Index was down 2.6% in January (see page 10).  The strongest developed market currencies against the USD were the New Zealand Dollar (+5.5%), Australian Dollar (+5.2%), and Norwegian Krone (+4.8%).  Emerging market currencies were mostly higher against the USD, with gains in the Korean Won (+4.9%), Taiwan Dollar (+3.9%), and Brazilian Real (+3.3%) and losses in the Turkish Lira (-6.7%) and Mexican Peso (-0.5%).
The US Treasury yield curve was little changed in January (see page 12).  10 year rates closed the month at 2.45%, unchanged from December month end.  Investment grade and high yield credit spreads were also little changed in January (see page 13).
In commodities, the GSCI index was down 1.4% in January (see page 11), with gains in Industrial Metals (+8.4%), Precious Metals (+5.5%), and Agriculture (+3.5%) and losses in Energy (-4.7%) and Livestock (-1.1%).  Within individual commodities, Palladium (+10.4%), Platinum (+10.1%), and Silver (+9.8%) saw the biggest gains, while Natural Gas (-16.1%), Gasoline (-8.7%), and Heating Oil (-6.2%) saw the biggest losses.  Gold was up 5% in January.

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Tuesday, January 3, 2017

December 2016 - Monthly Market Commentary

December was another mixed month for global risk assets.  Developed market equities were mostly higher, emerging market equities were mixed, the USD strengthened, US interest rates rose, commodities were mixed, and corporate credit spreads tightened.  As markets in December continued to digest the Trump victory and his cabinet appointments, US equity markets again made several new all-time highs during the month.  The Federal Reserve increased interest rates for the second time in the past decade, and indicated that three rate hikes were likely in 2017 as they pointed to a strengthening labor market and a pickup in inflation.  The ECB, on the other hand, held rates steady and extended its quantitative easing program to the end of 2017.  In Japan, the BOJ also held rates steady and offered a more optimistic assessment of the economy.  The US job report showed that 178,000 jobs were added in November, the unemployment rate fell to 4.6% (the lowest since August 2007), and the labor force participation rate ticked down to 62.7%. 
Notable corporate transactions announced in December included the $7.8 billion purchase of Eastern European brewing assets by Asahi Group Holdings from AB InBev, Amundi’s $3.8 billion acquisition of Pioneer Investments from Unicredit, Fairfax’s $4.9 billion purchase of Allied World, the $2.4 billion acquisition of Bank of America’s UK credit card business by Lloyds Banking Group, the $67 billion merger of Praxair and Linde, Coca-Cola’s $3.2 billion purchase of a 54.5% stake in Coca-Cola Beverages Africa from AB Inbev, the $950 million acquisition of 865 drug stores by Fred’s from Walgreens Boots Alliance, Megafon’s $740 million purchase of a majority stake in Mail.ru, the $3 billion acquisition of Chevron’s geothermal assets in Indonesia and the Philippines by units of Ayala Corp., and BP’s $1.3 billion purchase of Woolworths’ Australian fuels business.
Developed market equity markets were mostly higher in December (see page 8), with the largest gains in Italy (+13%), Spain (+8.2%), and Germany (+7%); the worst performing were Hong Kong (-6.4%), Japan (+1%), and Canada (+1.8%).  US small caps outperformed large caps, with the Russell 2000 up 2.8% and the Russell 1000 up 1.9% (see page 3).  Telecom (+8.1%), Utilities (+4.9%), and Real Estate (+4.4%) were the best performing sectors in December, while Consumer Discretionary (+0.1%), Materials (+0.1%), and Industrials (+0.5%) were the worst performing (see page 2).  Large cap growth (+1.2%) underperformed large cap value (+2.5%) in December (see page 3).  Emerging Market equities were mostly higher in December (see page 9), with the biggest gains in Russia (+12.5%), Indonesia (+5.4%), and Thailand (+2.1%); China (-4.1%), Argentina (-2.7%), and Taiwan (-1.3%) were the worst performing. 
In currencies, the USD Index was up 0.7% in December (see page 10).  The weakest developed market currencies against the USD were the Australian Dollar (-2.4%), Japanese Yen (-2.2%), and the New Zealand Dollar (-2.1%), while gains were seen in the Swedish Krona (+1.4%).  Emerging market currencies were mixed against the USD, with gains in the Russian Ruble (+4.2%), Brazilian Real (+4%), and South African Rand (+2.6%) and losses in the Korean Won (-2.5%), Turkish Lira (-2.5%), and Taiwan Dollar (-1.4%).
The US Treasury yield curve shifted higher as rates rose across the curve in December (see page 12).  10 year rates closed the month at 2.45%, up from 2.38% at November month end.  Investment grade and high yield credit spreads tightened in December (see page 13).
In commodities, the GSCI index was up 4.7% in December (see page 11), with gains in Energy (+8.4%) and Livestock (+7.5%) and losses in Industrial Metals (-5.4%), Precious Metals (-2%) and Agriculture (-1.3%).  Within individual commodities, Lean Hogs (+19.8%), Gasoline (+11.6%), and Natural Gas (+11.4%) saw the biggest gains, while Palladium (-11.5%), Cocoa (-11%), and Coffee (-9%) saw the biggest losses.  Gold was down 1.8% in December.

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