weekly market review€¦ · initial jobless claims. fell to 204,000 from the week prior, a decline...
TRANSCRIPT
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Weekly Market Review
Chart of the Week
September 16, 2019
1
Talking Points
Weekly Highlights
• Among equities, small caps strongly outperformed large caps, andvalue meaningfully outperformed growth stocks as a rotation fromgrowth to value precipitated through the markets. Internationalequities slightly outperformed domestic stocks, and emergingmarkets outperformed developed markets.
• Initial jobless claims fell to 204,000 from the week prior, a decline of13,000, reflecting a tight labor market and all-time historical lows.
• Commodity indices were mixed, as gold and oil fell but grains wereup. Soy beans rallied, as China lifted tariffs on a number of USagricultural products.
• Treasury yields were up, as the Treasury market sold off in responseto improved outlooks for financial stimulus and trade. The yield onthe 10-Year U.S. Treasury Note increased to 1.87% from 1.56% theprior week.
• Retail sales in August beat expectations (0.40% vs. 0.20%), althoughthey were lower coming off a particularly strong July (0.80%)
• US equities were generally up for the week on hopes of easing US-China trade tensions.
• The Yield on the 10-Year U.S. Treasury Note rose to 1.87%, a marked increase from a recent low of 1.46% on September 4 last week.
• The US dollar declined slightly, relative to a basket of major currencies, ahead of expectations for a 25-basis-points rate cut at the September FOMC meeting.
• Gold prices weakened on news of easing trade tensions and a fresh round of European stimulus.
• Oil prices fell in response to an International Energy Agency report warning of a “daunting crude surplus.”
0
50
100
150
200
250
300
350
Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19
Thou
sand
s
Non-Farm Payrolls-Trailing 12 Mos.
Source: Bloomberg
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PMC Weekly Market Review
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September 16, 2019
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19Source: Bloomberg
Wealth Index|Growth of $1: Trailing 24 Months
S&P 500 Dow Industrials Small Cap EAFE Emerging Mkts.
L
S
Source: Bloomberg
2.27% 0.87% -0.24%
2.68% 1.02% -1.47%
19.70%17.02%14.15%
One WeekValue Growth
6.31% 4.85% 3.44%
YTDValue Growth
15.93% 19.48% 22.65%
18.30% 21.48% 25.89%
2600
2650
2700
2750
2800
2850
2900
2950
3000
3050
3/18 4/1 4/15 4/29 5/13 5/27 6/10 6/24 7/8 7/22 8/5 8/19 9/2
Source: Bloomberg
S&P 500 Index: Trailing 180 Days
% Wgt in S&P 500
Week % Chg. YTD % Chg.
Consumer Discretionary 10.2 0.41% 24.0%Consumer Staples 7.4 -0.92% 19.3%Energy 4.6 3.36% 5.6%Financials 13.2 3.89% 19.1%Health Care 13.6 0.19% 5.4%Industrials 9.4 2.86% 22.9%Information Technology 21.9 -0.39% 30.6%Materials 2.7 3.34% 16.6%Real Estate 3.1 -3.24% 23.7%Communication Services 10.5 1.47% 24.2%Utilities 3.4 0.01% 18.1%
Source: Bloomberg
Sector Performance: S&P/Global Industry Classification Sectors (GICS)
Last Price Change % Chg. YTD % Last Price Change % Chg. YTD %S&P 500 3,007.39 28.68 0.96% 20.0% MSCI EM 1,022.33 14.36 1.43% 5.9%Dow Industrials 27,219.52 422.06 1.57% 16.7% 10-Year US Treas. 1.90 35 bps NM NMNasdaq 8,176.72 73.64 0.91% 23.2% Bloomberg Cmdts. Idx. 78.70 0.81 1.04% 2.6%Russell 2000 1,578.14 72.97 4.85% 17.0% Gold $1,488.94 -$18.82 -1.25% 16.0%Euro Stoxx Index 391.79 4.65 1.20% 16.0% Crude Oil $54.89 -$1.60 -2.83% 14.3%Shanghai Composite 3,031.24 45.37 1.52% 21.5% Dollar Index 98.18 -0.22 -0.22% 2.1%MSCI ACWI 526.53 5.70 1.10% 15.6% VIX Index 13.74 -1.26 -8.40% -45.9%Source: Bloomberg; Index % change is based on price.
Market Dashboard
10
12
14
16
18
20
22
24
26
Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19Source: Bloomberg
VIX Index: Trailing 180 Days
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PMC Weekly Market Review
3
September 16, 2019The Economy and Markets
Macro View: Home of the Brave
On the morning of September 14, 1814, Francis Scott Key penned the first verse of The Star Spangled Banner on the back of a letter as hewatched with pride as a group of US soldiers raised the American flag over Fort McHenry a day after more than 24 hours of continuousbombardment by the British. For the history buffs among us, the battle was a critical victory in the War of 1812 that began, somewhat ironically,given the current state of affairs with China, over a trade war with Britain. The instantly recognizable lyrics, which would not officially become ourcountry’s national anthem until 1931, still resonate deeply with Americans and are a fitting backdrop for our discussion this week. AlthoughBritain is no longer the primary subject of our trade grievances, the status of intercountry relations and the shape of the global trade landscaperemain paramount to the health of our stock market and economy overall.
The state of US-China trade affairs is certainly one of many public concerns that will weigh on Federal Reserve (the Fed) officials as they assemblein Washington next week for September’s FOMC meeting. The consensus seems to be that the Committee will cut rates by 25 basis points,although some would advocate for zero or even negative interest rates. The press had a field day on Wednesday when President Trump calledfor Fed ‘boneheads’ to slash interest rates to zero or less in an attempt to mimic what many of our trading partners are doing, refinance ourdebt, and “pay the lowest rate.” Notably, several large central banks began cutting rates earlier in the year, a trend that analysts expect willcontinue given existing trade dynamics and weakness in global growth.
The dollar has indeed rallied for the better part of the last 18 months on the heels of strong demand for US government debt—a light in a sea oflow- or negative-yielding assets. The Chinese yuan recently hit an 11-year low against the greenback (7.1 CNY: 1 USD), and many analysts believeit could weaken further going into year end, as China strategically allows its currency to remain low to retain trading power over its competitorsand make its goods less expensive in international markets. Structural issues in countries like Columbia and Argentina have been particularlypronounced, as currency collapses in recent weeks have propelled them to all-time lows against the dollar. Inevitably, we saw some dollarweakening this week ahead of the FOMC meeting, and would expect demand for the dollar to continue to ebb given the existing lower ratetrajectory.
On Thursday, the European Central Bank (ECB) announced that it would cut its key interest rate by 10 basis points to -0.50% and recommence itsmonthly bond repurchase program to the tune of €20 million per month of eurozone debt beginning November 1— setting the stage for anextended period of quantitative easing in the region. ECB President Mario Draghi cited weak growth and muted inflation as key factors in drivingits decision. In response, President Trump renewed his pressure on the Fed, expressing frustration with the pace of domestic interest rate cuts.The reality, of course, is that the US economy, while slowing, is otherwise fairly sound, and the Fed’s measured approach offers flexibility to takemore aggressive action down the road should a sharp downturn occur. Certainly, Draghi’s successor, Christine Laggard, could face a constrainedtoolkit with which to address any further deterioration in the region when she takes office on November 1.
Among the leading indicators this week, initial jobless claims fell by 13,000 to 204,000, August’s core Producer Price Index (PPI) came in higherthan expected (0.30% vs 0.20%), showing some pressure on producer margins, and August’s core Consumer Price Index (CPI) also rose morethan expected (0.30% vs 0.20%), with signs of inflation trickling through to the consumer. US stocks were up on hopes of easing US-China tradetensions, following news that Trump would delay Chinese tariffs from October 1 to October 15 as a gesture of good will in response to ChineseVice Premier Liu He’s request for a reprieve related to observing the 70th anniversary of the founding of the People’s Republic of China. In return,China waived import tariffs on 16 US goods, including shrimp and fish meal. Also in the headlines were the Hong Kong Stock Exchange’s bid forthe London Stock Exchange; several major corporate layoffs (including State Street, Schwab, and Uber); and National Security Advisor JohnBolton’s resignation. Notably, Bolton and President Trump have publically disagreed on many issues of national security, with the most recentbeing what he viewed as President Trump’s ill-timed invitation to meet with the Taliban at Camp David to discuss an Afghan peace treaty aheadof the 18th anniversary of the September 11 attacks.
In closing, we would be remiss not to pay a somber tribute to the memory of our financial services colleagues lost that fateful day. As we imaginethe awe that Francis Scott Key must have felt as he watched his comrades overcome adversity and raise the American flag during the Battle ofBaltimore, We cannot help but draw parallels to the sense of patriotism and unity we felt as a nation as we watched with bated breath the firefighters raise our flag on Ground Zero 18 years ago. Whether the US economy will face recessionary pressures is uncertain, but we continue tobelieve that there are few better places to be invested than the good ole’ USA.
…And the star-spangled banner in triumph shall wave. O'er the land of the free and the home of the brave!
Cynthia Crandall, CAIA| VP, Senior Investment Analyst
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PMC Weekly Market Review
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September 16, 2019
190
195
200
205
210
215
220
225
230
235
6/21 7/5 7/19 8/2 8/16 8/30
Thou
sand
s
Initial Jobless Claims-Trailing 12 Wks.
Source: Bloomberg
Economic Data
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19
Mon
thly
% C
hg.
Consumer Price Index-Trailing 12 Mos.
Headline CPI Core CPISource: Bloomberg
110.0
115.0
120.0
125.0
130.0
135.0
140.0
Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19
Inde
x
Consumer Board Confidence Index - Trailing 12 Mos.
Source: Bloomberg
0
50
100
150
200
250
300
350
Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19
Thou
sand
s
Non-Farm Payrolls-Trailing 12 Mos.
Source: Bloomberg
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19
%
Real GDP Growth Rate - Annualized - 12 Qtrs.
Source: Bloomberg
3.4
3.5
3.6
3.7
3.8
3.9
4.0
4.1
Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19
%
Unemployment Rate-Trailing 12 Mos.
Source: Bloomberg
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PMC Weekly Market Review September 16, 2019
5
Last Change % Chg. YTD % Last Change % Chg. YTD %Germany 10-Yr. Govt. -0.45 -20 bps NM NM France 10-Yr. Govt. -0.17 -18 bps NM NMGreece 10-Yr. Govt. 1.56 1 bps NM NM Ireland 10-Yr. Govt. 0.07 -14 bps NM NMItaly 10-Yr. Govt. 0.88 -1 bps NM NM Portugal 10-Yr. Govt. 0.31 -14 bps NM NMSpain 10-Yr. Govt. 0.30 -13 bps NM NM Netherlands 10-Yr. Govt. -0.32 -19 bps NM NMBelgium 10-Yr. Govt. -0.12 -18 bps NM NM U.K. 10-Yr. Govt. 0.76 -25 bps NM NM
SELECTED EUROPEAN SOVEREIGN YIELD PERFORMANCE
Source: BloombergBasis points (bps)
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
6/17 7/1 7/15 7/29 8/12 8/26 9/9
%
Spain 10-Year Government Bond Yield
Source: Bloomberg
0.0
0.5
1.0
1.5
2.0
2.5
6/17 7/1 7/15 7/29 8/12 8/26 9/9
%
Italy 10-Year Government Bond Yield
Source: Bloomberg
Eurozone
-0.80
-0.70
-0.60
-0.50
-0.40
-0.30
-0.20
-0.10
0.00
6/17 7/1 7/15 7/29 8/12 8/26 9/9
%
Germany 10-Year Government Bond Yield
Source: Bloomberg
0.0
0.5
1.0
1.5
2.0
2.5
3.0
6/17 7/1 7/15 7/29 8/12 8/26 9/9
%
Greece 10-Year Government Bond Yield
Source: Bloomberg
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PMC Weekly Market Review September 16, 2019
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7,400
7,500
7,600
7,700
7,800
7,900
8,000
8,100
8,200
8,300
8,400
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
xNasdaq Composite-Trailing 90 Days
Source: Bloomberg
2,000
2,200
2,400
2,600
2,800
3,000
3,200
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
x
Shanghai Composite Index-Trailing 90 Days
Source: Bloomberg
300
310
320
330
340
350
360
370
380
390
400
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
x
Euro Stoxx Index-Trailing 90 Days
Source: Bloomberg
24,500
25,000
25,500
26,000
26,500
27,000
27,500
28,000
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
x
Dow Jones Industrial Average -Trailing 90 Days
Source: Bloomberg
Equities
Last Change % Chg. YTD % Last Change % Chg. YTD %S&P 500 3,007.39 28.68 0.96% 19.97% Swiss Market Index 10,047.34 -26.48 -0.26% 19.20%Dow Industrials 27,219.52 422.06 1.57% 16.68% CAC 40 Index (France) 5,655.46 51.47 0.92% 19.55%Nasdaq Composite 8,176.72 73.64 0.91% 23.23% DAX Index (Germany) 12,468.53 276.80 2.27% 18.08%MSCI ACWI 526.53 5.70 1.10% 15.6% Irish Overall Index 6,282.27 220.20 3.63% 14.64%MSCI EM 1,022.33 14.36 1.43% 5.9% Nikkei 225 21,988.29 788.72 3.72% 9.86%S&P/TSX (Canada) 16,682.42 147.09 0.89% 16.47% Hang Seng Index 27,352.69 661.93 2.48% 5.83%Mexico IPC 42,841.46 161.12 0.38% 2.95% Shanghai Composite 3,031.24 45.37 1.52% 21.55%Brazil Bovespa 103,501.20 565.80 0.55% 17.77% Kospi Index (S. Korea) 2,049.20 60.67 3.05% 0.40%Euro Stoxx 600 391.79 4.65 1.20% 16.03% Taiwan Taiex Index 10,827.55 46.91 0.44% 11.31%FTSE 100 7,367.46 85.12 1.17% 9.50% Tel Aviv 25 Index 1,615.61 53.33 3.41% 10.37%
IBEX 35 (Spain) 9,137.90 147.80 1.64% 7.00% MOEX Index (Russia) 2,791.74 -5.81 -0.21% 17.83%
WORLD MARKET PERFORMANCE
Source: Bloomberg; Index % change is based on price.
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PMC Weekly Market Review September 16, 2019
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90,000
92,000
94,000
96,000
98,000
100,000
102,000
104,000
106,000
108,000
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
x
Brazil (Bovespa Index)-Trailing 90 Days
Source: Bloomberg
34,000
35,000
36,000
37,000
38,000
39,000
40,000
41,000
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
x
India (Sensex Index)-Trailing 90 Days
Source: Bloomberg
1,200
1,250
1,300
1,350
1,400
1,450
6/16 6/30 7/14 7/28 8/11 8/25 9/8
Inde
x
Egypt (Hermes Index)-Trailing 90 Days
Source: Bloomberg
2,800
2,900
3,000
3,100
3,200
3,300
3,400
3,500
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
x
Singapore (Straits Times Index)-Trailing 90 Days
Source: Bloomberg
Equities – Emerging and Frontier Markets
Last Change % Chg. YTD % Last Change % Chg. YTD %Mexico IPC 42,841.46 161.12 0.4% 3.0% Hang Seng Index 27,352.69 661.93 2.5% 5.8%Brazil (Bovespa Index) 103,501.20 565.80 0.5% 17.8% India (Sensex 30) 37,384.99 403.22 1.1% 3.7%MOEX Index (Russia) 2,791.74 -5.81 -0.2% 17.8% Malaysia (KLCI Index) 1,601.25 1.50 0.1% -5.3%Czech Republic (Prague) 1,050.17 18.11 1.8% 6.4% Singapore (Straits Times Index) 3,211.49 67.01 2.1% 4.7%Turkey (Istanbul) 103,071.81 4084.32 4.1% 12.9% Thailand (SET Index) 1,661.96 -8.10 -0.5% 6.3%Egypt (Hermes Index) 1,392.70 10.72 0.8% 9.0% Indonesia (Jakarta) 6,334.84 25.89 0.4% 2.3%Kenya (Nairobi 20 Index) 2,431.37 11.70 0.5% -14.2% Pakistan (Karachi KSE 100) 31,481.31 1014.11 3.3% -15.1%Saudi Arabia (TASI Index) 7,831.80 -222.95 -2.8% 0.1% Vietnam (Ho Chi Minh) 987.22 13.14 1.3% 10.6%Lebanon (Beirut BLOM Index) 796.71 2.49 0.3% -18.4% Sri Lanka (Colombo) 5,825.54 -24.71 -0.4% -3.7%Palestine 520.35 -1.36 -0.3% -1.7% Cambodia (Laos) 719.94 -26.68 -3.6% -13.9%
EMERGING AND FRONTIER MARKET PERFORMANCE
Source: Bloomberg; Index % change is based on price.
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PMC Weekly Market Review September 16, 2019
YIELD CURVES
8
Last Change % Chg. YTD % Last Change % Chg. YTD %2-Yr. U.S. Treasury 1.80% -5 bps NM NM Prime Rate 5.25% 0.00 NM NM5-Yr. U.S. Treasury 1.75% 33 bps NM NM Fed Funds Rate 2.25% 0.00 NM NM10-Yr. U.S. Treasury 1.90% 35 bps NM NM Discount Rate 2.75% 0.00 NM NM30-Yr. U.S. Treasury 2.38% 36 bps NM NM LIBOR (3 Mo.) 2.12% -2 bps NM NMGerman 10-Yr. Govt. -0.45% -20 bps NM NM Bond Buyer 40 Muni 2.71% 13 bps NM NMFrance 10-Yr. -0.17% -18 bps NM NM Bond Buyer 40 G.O. 2.85% NA NM NMItaly 10-Yr. 0.88% -1 bps NM NM Bond Buyer 40 Rev. 3.33% NA NM NMFed 5-Yr Fwd BE Inf. 1.62% -2 bps NM NM
SELECTED INTEREST RATES
Source: Bloomberg
1M 1Y 3Y 5Y 8Y 10Y 15Y 20Y 30Y0.00
1.00
2.00
3.00
4.00
5.00
6.00
US Treasury Actives Curve 20190906US Treasury Actives Curve 20190913USD Composite (A) BFV Curve 20190914USD Composite (BBB) BFV Curve 20190914
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
3/18 4/18 5/18 6/18 7/18 8/18
Inde
x
BBB/Baa- 10-Yr Treas. Spread Rising Line = Risk Aversion
Source: Bloomberg
Source: Bloomberg
Interest Rates
1.00
1.20
1.40
1.60
1.80
2.00
2.20
2.40
2.60
2.80
3/18 4/18 5/18 6/18 7/18 8/18
Yiel
d %
10-Year Treasury Yield - Trailing 180 Days
Source: Bloomberg
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PMC Weekly Market Review September 16, 2019
9
94
95
96
97
98
99
100
3/18 4/18 5/18 6/18 7/18 8/18
U.S. Dollar Index - Trailing Six Months
Source: Bloomberg
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1.20
3/18 4/18 5/18 6/18 7/18 8/18
Euro - U.S. Dollars per Euro
Source: Bloomberg
100.00
102.00
104.00
106.00
108.00
110.00
112.00
114.00
3/18 4/18 5/18 6/18 7/18 8/18
Japanese yen - Yen per U.S. Dollar
Source: Bloomberg
Last Change % Chg. YTD % Last Change % Chg. YTD %Dollar Index 98.18 -0.220 -0.22% 2.08% Chinese Yuan 7.08 -0.037 0.52% -2.84%Euro 1.11 0.005 0.45% -3.38% Swiss Franc 0.99 0.003 -0.27% -0.82%Japanese Yen 108.10 1.180 -1.09% 1.47% New Zealand Dollar 0.64 -0.004 -0.67% -5.08%British Pound 1.25 0.021 1.71% -2.05% Brazilian Real 4.09 0.028 -0.68% -5.23%Canadian Dollar 1.33 0.011 -0.81% 2.69% Mexican Peso 19.42 -0.094 0.49% 1.09%
SELECTED CURRENCY PERFORMANCE
Source: Bloomberg
6.40
6.50
6.60
6.70
6.80
6.90
7.00
7.10
7.20
7.30
3/18 4/18 5/18 6/18 7/18 8/18
Chinese yuan - yuan per U.S. Dollar
Source: Bloomberg
Currencies
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PMC Weekly Market Review September 16, 2019
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0
10
20
30
40
50
60
70
3/18 4/18 5/18 6/18 7/18 8/18
$ pe
r bar
rel
Crude Oil - Light Crude ($ per barrel)
Source: Bloomberg
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
3/18 4/18 5/18 6/18 7/18 8/18
$ pe
r oun
ce
Gold - Spot gold price ($ per ounce)
Source: Bloomberg
320
340
360
380
400
420
440
460
480
3/18 4/18 5/18 6/18 7/18 8/18
$ pe
r bus
hel
Corn - Active Contract
Source: Bloomberg
Last Change % Chg. YTD % Last Change % Chg. YTD %Bloomberg Comm. Idx. 78.70 0.81 1.04% 2.58% Platinum Spot $949.05 -$2.64 -0.28% 19.22%Crude Oil $54.94 -$1.60 -2.83% 14.32% Corn 368.75 13.25 3.73% -7.23%Natural Gas $2.62 $0.13 5.05% -4.72% Wheat 483.50 19.75 4.26% -10.88%Gasoline ($/Gal.) $2.57 $0.01 0.20% 13.87% Soybeans 898.75 41.00 4.78% -3.90%Heating Oil 187.79 -2.19 -1.15% 9.76% Sugar 11.94 -0.03 -0.25% -9.20%Gold Spot $1,489.13 -$18.82 -1.25% 16.02% Orange Juice 101.95 -0.05 -0.05% -22.09%Silver Spot $17.45 -$0.71 -3.90% 12.74% Aluminum 1,803.00 20.00 1.12% -2.33%Source: Bloomberg; % change is based on price. Copper 5,833.00 0.00 0.00% -2.21%
SELECTED COMMODITY MARKET PERFORMANCE
Commodities
5,000
5,200
5,400
5,600
5,800
6,000
6,200
6,400
6,600
6,800
3/18 4/18 5/18 6/18 7/18 8/18
Inde
x
Copper
Source: Bloomberg
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PMC Weekly Market Review September 16, 2019
11
1,215
1,220
1,225
1,230
1,235
1,240
1,245
1,250
1,255
1,260
1,265
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
x
HFRX Global Hedge Fund Index - Trailing 90 Days
Source: Bloomberg
930
935
940
945
950
955
960
965
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
x
HFRX Equity Market Neutral - Trailing 90 Days
Source: Bloomberg
1,512
1,514
1,516
1,518
1,520
1,522
1,524
1,526
1,528
1,530
1,532
1,534
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
x
IQ Fixed Income Beta Arb Index - Trailing 90 Days
Source: Bloomberg
1,200
1,205
1,210
1,215
1,220
1,225
1,230
1,235
1,240
1,245
6/17 7/1 7/15 7/29 8/12 8/26 9/9
Inde
x
HFRX Equity Hedge Index - Trailing 90 Days
Source: Bloomberg
Last Change % Chg. YTD % Last Change % Chg. YTD %HFRX Global Hedge Fund Index 1255.92 -2.39 -0.19% 5.55% HFRX Special Situation Index 1234.09 -2.28 -0.18% 2.58%HFRX Equity Market Neutral 952.37 2.13 0.22% -2.09% HFRX Merger Arbitrage Index 1792.66 4.09 0.23% -1.37%HFRX Equity Hedge Index 1241.39 2.31 0.19% 7.84% HFRX Convertible Arbitrage Index 817.01 3.45 0.42% 3.73%HFRX Event-Driven Index 1527.10 -2.49 -0.16% 3.80% HFRX Macro CTA Index 1173.26 -12.38 -1.04% 4.19%HFRX Absolute Return Index 1086.39 2.03 0.19% 2.68% IQ Fixed Income Beta Arb Index 1534.57 4.79 0.31% 4.92%
SELECTED ALTERNATIVE INVESTMENT INDEX PERFORMANCE
Source: Bloomberg; Index % change is based on price.
Alternative Investments
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PMC Weekly Market Review
4.10
4.20
4.30
4.40
4.50
4.60
4.70
3/18 4/18 5/18 6/18 7/18 8/18
Inde
x
S&P 500/MSCI EAFE - Trailing 180 Days
Source: Bloomberg
1.40
1.45
1.50
1.55
1.60
1.65
3/18 4/18 5/18 6/18 7/18 8/18
Inde
x
MSCI EAFE/MSCI EM - Trailing 180 Days
Source: Bloomberg
0.40
0.41
0.42
0.43
0.44
0.45
0.46
0.47
3/18 4/18 5/18 6/18 7/18 8/18
Inde
xLarge Cap/Small Cap - Trailing 180 Days
Source: Bloomberg
0.91
0.92
0.93
0.94
0.95
0.96
0.97
0.98
0.99
1.00
1.01
1.02
3/18 4/18 5/18 6/18 7/18 8/18
Inde
x
Growth/Value - Trailing 180 Days
Source: Bloomberg
September 16, 2019
12
3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
3/18 4/18 5/18 6/18 7/18 8/18
Inde
x
S&P 500/MSCI EM - Trailing 180 Days
Source: Bloomberg
Portfolio Construction
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PMC Weekly Market Review
0.800
0.820
0.840
0.860
0.880
0.900
0.920
0.940
3/18 4/18 5/18 6/18 7/18 8/18
Inde
xHigh Yield/Inv. Grade Bonds - Trailing 180 Days
Source: Bloomberg
0.245
0.250
0.255
0.260
0.265
0.270
0.275
0.280
3/18 4/18 5/18 6/18 7/18 8/18
Inde
x
Info Tech/S&P 500 - Trailing 180 Days
Source: Bloomberg
1.78
1.80
1.82
1.84
1.86
1.88
1.90
1.92
1.94
3/18 4/18 5/18 6/18 7/18 8/18
Inde
x
Inv. Grade Bonds/Int. Govt. Bonds - Trailing 180 Days
Source: Bloomberg
1.52
1.54
1.56
1.58
1.60
1.62
1.64
1.66
1.68
1.70
1.72
3/18 4/18 5/18 6/18 7/18 8/18
Inde
x
High Yield Bonds/Int. Govt. Bonds - Trailing 180 Days
Source: Bloomberg
September 16, 2019
13
Portfolio Construction (continued)
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14
September 16, 2019
The Relative Strength Matrix provides an indication of how the various asset classes have performed relative to one another over the past 30 days. A number greater than 1.0 indicates that the asset class in the far left column has outperformed the corresponding asset class in the top row over the past 30 days. A number below 1.0 means the asset class on the left has underperformed the asset class at the top. The green shading indicates outperformance, and the red shading indicates underperformance.
Source: Bloomberg
Large Cap Core
Large Cap Growth
Large Cap Value
Mid Cap Core
Mid Cap Growth
Mid Cap Value
Small Cap Core
Small Cap Growth
Small Cap Value
Int'l . Developed
Emerging Markets REITs Comm. Int. Bond High Yield
Large Cap Core 1.00 1.03 0.98 1.02 1.10 0.99 1.01 1.05 0.98 0.98 1.04 0.99 1.08 1.10 1.03Large Cap Growth 0.97 1.00 0.95 0.99 1.07 0.96 0.98 1.02 0.95 0.95 1.01 0.96 1.05 1.07 1.00Large Cap Value 1.02 1.05 1.00 1.04 1.12 1.01 1.03 1.07 1.00 1.00 1.06 1.01 1.11 1.13 1.06Mid Cap Core 0.98 1.01 0.96 1.00 1.07 0.97 0.99 1.03 0.96 0.96 1.02 0.97 1.06 1.08 1.01Mid Cap Growth 0.91 0.94 0.89 0.93 1.00 0.90 0.92 0.96 0.89 0.89 0.95 0.91 0.99 1.01 0.94Mid Cap Value 1.01 1.04 0.99 1.04 1.11 1.00 1.03 1.06 0.99 0.99 1.05 1.01 1.10 1.12 1.05Small Cap Core 0.99 1.02 0.97 1.01 1.08 0.97 1.00 1.04 0.97 0.97 1.03 0.98 1.07 1.09 1.02Small Cap Growth 0.95 0.98 0.93 0.97 1.04 0.94 0.96 1.00 0.93 0.93 0.99 0.95 1.03 1.05 0.99Small Cap Value 1.02 1.05 1.00 1.04 1.12 1.01 1.03 1.07 1.00 1.00 1.06 1.01 1.10 1.13 1.06Int'l . Developed 1.02 1.05 1.00 1.04 1.12 1.01 1.03 1.07 1.00 1.00 1.06 1.01 1.10 1.12 1.05Emerging Markets 0.96 0.99 0.94 0.98 1.06 0.95 0.97 1.01 0.94 0.94 1.00 0.96 1.04 1.06 1.00REITs 1.01 1.04 0.99 1.03 1.10 0.99 1.02 1.06 0.99 0.99 1.05 1.00 1.09 1.11 1.04Commodities 0.92 0.95 0.90 0.94 1.01 0.91 0.93 0.97 0.91 0.91 0.96 0.92 1.00 1.02 0.96Int. Bond 0.91 0.93 0.89 0.93 0.99 0.89 0.92 0.95 0.89 0.89 0.94 0.90 0.98 1.00 0.94High Yield 0.97 1.00 0.95 0.99 1.06 0.95 0.98 1.01 0.95 0.95 1.00 0.96 1.05 1.07 1.00
RELATIVE STRENGTH MATRIX (BASED ON 30-DAY RSI)
6/27 7/4 7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12
Large Cap (R200) -0.91% 2.44% 0.27% -0.17% 0.26% -1.62% -0.58% -2.98% 2.63% 0.07% 1.73% 1.03%
Small Cap (R2000) -1.08% 1.65% -0.90% -0.15% 0.37% -0.68% -1.20% -4.60% 3.03% -0.62% 0.94% 4.26%
MSCI EAFE -0.24% 1.87% -1.54% -0.69% 0.66% -1.28% -2.53% -2.66% 1.78% 0.11% 2.32% 1.68%
MSCI Em. Mkts. 0.10% 0.93% -0.89% -0.33% 0.24% -2.82% -3.93% -2.11% 1.26% -0.57% 3.39% 1.93%
BarCap Agg. (AGG) -0.01% 0.14% -0.80% 0.57% -0.10% 0.65% 0.79% 0.86% -0.39% 0.63% -0.42% -1.00%
High Yield (JNK) -0.54% 0.13% -0.57% -0.06% 0.31% -0.52% -0.36% -0.53% 1.33% 0.33% -0.27% 0.28%
Bloomberg Commodity
Index1.29% -1.23% 1.72% -2.04% 0.10% -2.52% 0.04% -0.44% -0.37% 1.40% 0.70% 0.69%
Hedge Funds (HFRX Global) -0.16% 0.79% -0.20% 0.16% 0.20% -0.03% -0.09% -0.19% 0.49% 0.01% 0.49% -0.22%
60/40* -0.44% 1.28% -0.59% 0.01% 0.21% -0.69% -0.61% -1.58% 1.35% 0.18% 0.97% 0.75%
48/32/20 (w/Alts.)** -0.39% 1.18% -0.51% 0.04% 0.21% -0.56% -0.51% -1.30% 1.18% 0.15% 0.87% 0.55%
Source: Bloomberg; *60/40 portfolio = 30% Large Cap/10% Small Cap/15% EAFE/5% Emerging Markets/35% BarCap Agg./5% High Yield.**48/32/20 portfolio = 24% Large Cap/8% Small Cap/12% EAFE/4% Emerging Markets/28% BarCap Agg./4% High Yield/20% HFRX Global Index.
WEEKLY ASSET CLASS PERFORMANCE (Prior 12 weeks ending Thursday)
Alternatives
Asset Allocation
Domestic Equity
Int'l. Equity
Fixed Income
Commodities
Equity
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PMC Weekly Market Review September 16, 2019
15
Index Overview & Key DefinitionsFed, The Fed or FED refers to the Federal Reserve System, the central bank of the United States. The Federal Open Market Committee (FOMC) is the monetary policymaking body ofthe Federal Reserve System. Fed Funds Rate, the interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institutionovernight. The European Central Bank (ECB) is the central bank for Europe's single currency, the euro. The ECB’s main task is to maintain the euro's purchasing power and thus pricestability in the euro area. The euro area comprises the 19 European Union countries that have introduced the euro since 1999. The Gross Domestic Product (GDP) rate is ameasurement of the output of goods and services produced by labor and property located in the United States. Basis Point(s) is a unit that is equal to 1/100th of 1%, and is used todenote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security. Aseparately managed account (SMA) is an individual managed investment account offered typically by a brokerage firm through one of their brokers or financial consultants andmanaged by independent investment management firms (often called money managers for short) and have varying fee structures. The Consumer Price Index (CPI) measures thechange in the cost of a fixed basket of products and services. The Producer Price Index (PPI) program measures the average change over time in the selling prices received bydomestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services. Core CPI is an additional CPIIndex, excludes energy and food item price changes, and measures the “core” or “underlying” rate of inflation. The PCE (Personal Consumption Expenditure) Index of Prices is a US--wide indicator of the average increase in prices for all domestic personal consumption. Using a variety of data including U.S. Consumer Price Index and Producer Price Index prices, itis derived from personal consumption expenditures; essentially a measure of goods and services targeted towards individuals and consumed by individuals. The PurchasingManagers' Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production,supplier deliveries and the employment environment. Brexit is a commonly used term for the United Kingdom's withdrawal from the European Union. The Kansas City FedManufacturing Survey monitors manufacturing plants selected according to geographic distribution, industry mix and size in the Tenth Federal Reserve District. West TexasIntermediate (WTI), also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. Risk Premium is the return in excess of the risk-free rate of return aninvestment is expected to yield. LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate, which some of the world’s leading banks charge each other for short-term loans. Itstands for Intercontinental Exchange London Interbank Offered Rate and serves as the first step to calculating interest rates on various loans throughout the world.
The Dow Jones Industrial Average (DOW or DJIA) is an unmanaged index of 30 common stocks comprised of 30 actively traded blue chip stocks, primarily industrials and assumesreinvestment of dividends. The S&P 500 Index is an unmanaged index comprised of 500 widely held securities considered to be representative of the stock market in general. TheS&P/Case-Shiller Home Price Indices measure the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions acrossthe United States. The Nasdaq Composite Index is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market. The US Dollar Index is ameasure of the value of the United States dollar relative to a basket of foreign currencies. It is a weighted geometric mean of the dollar's value relative to other select currencies(Euro, Japanese yen, Pound sterling, Canadian dollar, Swedish krona (SEK) & Swiss franc). The FTSE 100 Index (FTSE 100) is a share index of the 100 companies listed on the LondonStock Exchange (LSE) with the highest market capitalization. The Bloomberg Commodity Index (formerly the Dow Jones-UBS Commodity Index) tracks prices of futures contracts onphysical commodities on the commodity markets and is designed to minimize concentration in any one commodity or sector (currently 22 commodity futures in seven sectors). TheBarclays Capital US Credit Index is an unmanaged index considered representative of publicly issued, SEC-registered US corporate and specified foreign debentures and securednotes. The Barclays Capital US Aggregate Bond Index is a market capitalization-weighted index of investment-grade, fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Barclays Capital US Corporate High Yield Index covers the USD-denominated, non-investmentgrade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. The index mayinclude emerging market debt. The Barclays Capital Municipal Bond Index is an unmanaged index comprised of investment-grade, fixed-rate municipal securities representative ofthe tax-exempt bond market in general. The Barclays Capital US Treasury Total Return Index is an unmanaged index of public obligations of the US Treasury with a remainingmaturity of one year or more. The Barclays Capital Global Aggregate ex-U.S. Index is a market capitalization-weighted index, meaning the securities in the index are weightedaccording to the market size of each bond type. Most U.S. traded investment grade bonds are represented. Municipal bonds, and Treasury Inflation-Protected Securities areexcluded, due to tax treatment issues. The index includes Treasury securities, Government agency bonds, Mortgage-backed bonds, Corporate bonds, and a small amount of foreignbonds traded in U.S. The Barclays Capital U.S. 5-10 Year Corporate Bond Index measures the investment return of U.S. dollar denominated, investment-grade, fixed rate, taxablesecurities issued by industrial, utility, and financial companies with maturities between 5 and 10 years. Treasury securities, mortgage-backed securities (MBS) foreign bonds,government agency bonds and corporate bonds are some of the categories included in the index. The Barclays Capital U.S Corporate High-Yield Index is composed of fixed-rate,publicly issued, non-investment grade debt. The Barclays Capital U.S. Corporate 5-10 Year Index includes U.S. dollar-denominated, investment-grade, fixed-rate, taxable securitiesissued by industrial, utility, & financial companies, with maturities between 5 & 10 years. The Russell 1000 Index is a market capitalization-weighted benchmark index made up ofthe 1000 largest U.S. companies in the Russell 3000 Index. The Russell 1000 Growth Index is an unmanaged index considered representative of large-cap growth stocks. The Russell1000 Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 2000 Index is an unmanaged index considered representative of small-capstocks. The Russell 2000 Growth Index is an unmanaged index considered representative of small-cap growth stocks. The Russell 2000 Growth Index is an unmanaged indexconsidered representative of small-cap value stocks. The Russell 3000 Index is an unmanaged index considered representative of the US stock market. The Russell Midcap Index is asubset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The RussellMidcap Growth Index is an unmanaged index considered representative of mid-cap growth stocks. The Russell Midcap Value Index is an unmanaged index consideredrepresentative of mid-cap value stocks. The HFRX Indices are a series of benchmarks of hedge fund industry performance which are engineered to achieve representativeperformance of a larger universe of hedge fund strategies. Hedge Fund Research, Inc. employs the HFRX Methodology (UCITS compliant), a proprietary and highly quantitativeprocess by which hedge funds are selected as constituents for the HFRX Indices. The University of Michigan Consumer Sentiment Index (MCSI) is a survey of consumer confidenceconducted by the University of Michigan using telephone surveys to gather information on consumer expectations regarding the overall economy. The CBOE Volatility Index (VIX) isan up-to-the-minute market estimate of expected volatility that is calculated by using real-time S&P 500 Index option bid/ask quotes. The Index uses nearby and second nearbyoptions with at least 8 days left to expiration and then weights them to yield a constant, 30-day measure of the expected volatility of the S&P 500 Index. The MSCI EAFE Index isdesigned to measure the equity market performance of developed markets outside of the U.S. & Canada. The MSCI EAFE Growth Index is an unmanaged index consideredrepresentative of growth stocks of Europe, Australasia and the Far East. The MSCI EAFE Value Index is an unmanaged index considered representative of value stocks of Europe,Australasia and the Far East. The MSCI EM (Emerging Markets) Latin America Index is a free float-adjusted market capitalization weighted index that is designed to measure theequity market performance of emerging markets in Latin America. The MSCI World ex-U.S. Index captures large and mid-cap representation across 22 of 23 Developed Markets(DM) countries - excluding the US. With 1,002 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. The MSCI JapanIndex is designed to measure the performance of the large and mid-cap segments of the Japanese market. With 320 constituents, the index covers approximately 85% of the freefloat-adjusted market capitalization in Japan. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity marketperformance in the global emerging markets. The MSCI Europe Index is an unmanaged index considered representative of stocks of developed European countries. The MSCIPacific Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in the Pacific region.The Barclays Intermediate US Government/Credit Bond Index is a market capitalization-weighted index of investment-grade, fixed-rate debt issues, including Treasuries,government-related and U.S. corporate securities, with maturities of at least one year and less than 10 years. The NY Empire State Manufacturing Index is based on the monthlysurvey of manufacturers in New York State – known as the Empire State Manufacturing Survey – conducted by the Federal Reserve Bank of New York. The S&P The Dow JonesWilshire U.S. REIT Index tracks the performance of publicly traded REITs and REIT-like securities and is designed to serve as a proxy for direct real estate investment, in part byexcluding companies whose performance may be driven by factors other than the value of real estate. The Russell Top 200 Index measures the performance of the 200 largestcompanies in the Russell 1000 Index, with a weighted average market capitalization of $186 billion. The Barclays 1-3 Year US Treasury Bond Index measures public US Treasuryobligations with remaining maturities of one to three years. The S&P LSTA Leveraged Loan Index is an unmanaged capitalization-weighted syndicated loan index based upon marketweightings, spreads and interest payments. It covers the US market back to 1997 and currently calculates on a daily basis. The NFIB Small Business Optimism Index is compiledfrom a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members
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PMC Weekly Market Review September 16, 2019
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The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this weeklyreview is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of anyinvestment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will providepositive performance over any period of time. An investor may experience loss of principal. Investment decisions should always be madebased on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investmentstrategies described may not be suitable for all investors and investors should consult with an investment advisor to determine theappropriate investment strategy. Past performance is not indicative of future results.
Information obtained from third party sources are believed to be reliable but not guaranteed. Envestnet|PMC™ makes no representationregarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date ofwriting and are subject to change at any time without notice.
Investments in smaller companies carry greater risk than is customarily associated with larger companies for various reasons such as volatilityof earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. Investing overseas involves specialrisks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, andrelatively illiquid markets. Income (bond) securities are subject to interest rate risk, which is the risk that debt securities in a portfolio willdecline in value because of increases in market interest rates.
Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing in ETFs may bear indirect fees andexpenses charged by ETFs in addition to its direct fees and expenses, as well as indirectly bearing the principal risks of those ETFs. ETFs maytrade at a discount to their net asset value and are subject to the market fluctuations of their underlying investments. Investing incommodities can be volatile and can suffer from periods of prolonged decline in value and may not be suitable for all investors.
Index Performance is presented for illustrative purposes only and does not represent the performance of any specific investment product orportfolio. An investment cannot be made directly into an index.
Alternative Investments may have complex terms and features that are not easily understood and are not suitable for all investors. Youshould conduct your own due diligence to ensure you understand the features of the product before investing. Alternative investmentstrategies may employ a variety of hedging techniques and non-traditional instruments such as inverse and leveraged products. Certainhedging techniques include matched combinations that neutralize or offset individual risks such as merger arbitrage, long/short equity,convertible bond arbitrage and fixed-income arbitrage. Leveraged products are those that employ financial derivatives and debt to try toachieve a multiple (for example two or three times) of the return or inverse return of a stated index or benchmark over the course of a singleday. Inverse products utilize short selling, derivatives trading, and other leveraged investment techniques, such as futures trading to achievetheir objectives, mainly to track the inverse of their benchmarks. As with all investments, there is no assurance that any investment strategieswill achieve their objectives or protect against losses.
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