Pages

About Us

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

Monday, February 3, 2020

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.

Contact CurAlea Associates for a Daily Market Review.

Thursday, January 2, 2020

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.

Contact CurAlea Associates for a Daily Market Review.