EWM Weekly Capital Market Highlights for Week Ended 12/14/2018

By | Financial Markets & Economy, Weekly Capital Market Updates

US equities traded sideways most of the week, but succumbed to global growth worries on Friday to close the week in red. Emerging markets also lost ground for the week, affected by China’s economic data miss. The weaker-than-expected economic data pushed European stocks lower on Friday, but they still managed to log a small increase for the week.

Treasury yields ticked higher across the curve, with the yield on the 10-year note up four basis points. The yield curve continued to flatten. curve with the yield on the 10-year note up four basis points. The yield curve continued to flatten.

The dollar gained ground during the week, reflecting investor fears of an economic slowdown in China,and was further supported by weakness in the euro and pound.

Commodity prices fell on concerns of weaker demand and a stronger dollar. Energy continued to face weakness on fears of oversupply and slower demand coming from China. Gold also eased as the dollar rose.

US producer prices unexpectedly rose in November, as increases in the costs for services offset a sharp decline for energy products. The core Consumer Price Index, which excludes volatile food and energy costs, rose 0.2% from the prior month and 2.2% from a year earlier. Initial jobless claims dropped to 206,000, a decrease of 27,000 from the previous week’s revised level of 233,000.


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EWM Weekly Capital Market Highlights for Week Ended 12/07/2018

By | Financial Markets & Economy, Weekly Capital Market Updates

Domestic equities were down for the week, with small cap stocks falling the most. International equities ended the week in negative territory as well, with emerging markets stocks outperforming their developed counterparts.

Treasury yields were mixed through end of day Thursday, with longer-term yields falling more than ten basis points, whereas shorter yields rose, leading to a flatter yield curve.

The US dollar weakened during the week, as the yield on the 10-Year Treasury Note fell to three-month lows.

Commodities were up over all, on the back of a strong upward movement in the price of crude oil, after a surprising announcement that the Organization of the Petroleum Exporting Countries (OPEC) and its allies will cut production more than expected.

In other economic news, the Institute of Supply Management (ISM) has released the November Non-Manufacturing Purchasing Managers’ Index (PMI), and reported a headline composite number of 60.7, up .04 since last month. This represents continued growth, and at a slightly faster rate, in the non-manufacturing sector.

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EWM Weekly Capital Market Highlights for Week Ended 11/16/2018

By | Financial Markets & Economy, Weekly Capital Market Updates

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • Among equities, small caps essentially matched the return of large caps; growth stocks under performed value stocks; international stocks outperformed US stocks; and emerging markets beat developed markets.
  • Treasury yields fell. The yield on the US 10-year Treasury Note ended the week at around 3.1%.
  • Commodity indices rebounded. Although crude oil prices plunged, most other commodity prices rose.
  • Dollar indices declined. After reaching an 18-month high early in the week, the dollar ended the week lower against most other currencies.
  • Among major economic data, October headline CPI rose 2.5% year over year, matching expectation; October core CPI rose 2.1% year over year, slightly below expectation; October retail sales surged, jumping 0.8% from September.

Click here to download the complete weekly report: EWMWeeklyReview 11.16.18

EWM Weekly Capital Market Highlights for Week Ended 11/09/2018

By | Financial Markets & Economy, Weekly Capital Market Updates

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • Stocks pushed higher in US equity markets despite a moderate pullback on Friday, whereas growth and value stocks produced similar results. Meanwhile, large cap outperformed small cap stocks. Non-US developed equities also rose for the week, albeit to a lesser degree than their US counterparts, and value outperformed growth stocks. In emerging markets, stocks were slightly lower for the week, as Latin American equities sold off sharply, led by Brazil, which was one of the worst-performing markets around the globe.
  • Treasury yields were stable for the week, as the curve slightly flattened. Yields shorter than 10 years rose marginally, whereas yields on the 20- and 30 year notes fell. Overall, moves in the yield curve were muted, as the Fed decided to hold rates steady, with one more meeting to come before the end of the year.
  • Commodity prices retreated during the week, led by a sharp drop in the price of oil. In fact, oil entered bear market territory, as it was down 21% from its October highs. Global economic growth concerns have dampened the demand outlook and have left market participants searching for a bottom.
  • Volatility declined significantly during the week, as the CBOE Volatility Index (VIX) fell more than 10%. The US dollar was slightly higher for the week.
  • Consumer sentiment remained high in the US. The University of Michigan Index of Consumer Sentiment was 98.3 in November, which was down from 98.6 in October.

Click here to download the complete weekly report: EWMWeeklyReview 11.9.18

EWM Weekly Capital Market Highlights for Week Ended 11/02/2018

By | Financial Markets & Economy, Weekly Capital Market Updates

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • US and global equities rallied this week after a very disappointing October. US small caps were up 4%, and large caps rose roughly 3%. Europe also rallied more than 3%. Latin America was the laggard for the week, up a little more than 1%, despite a rally of more than 11% in Argentina and nearly 3% in Brazil.
  • Treasury yields move higher. Treasury yields were four to six basis points higher through Thursday for maturities greater than one year. Friday’s jobs report pushed yields another four to five basis points higher.
  • The US Dollar Index ended the week slightly lower. The index rallied through the middle of Wednesday, then sold off sharply Thursday, erasing the week’s gains.
  • Crude oil had its worst week since February, down roughly 2.5%, as the US is expected to announce exemptions for eight countries to continue buying oil from Iran, after US sanctions are applied later this year.
  • Among other economic data released this week: Housing prices were nearly unchanged for the three month period ending August and up 5.5% for the trailing year. Motor vehicle sales topped 17.5 million in October, slightly higher than in September and the best monthly number since last November. October’s employment report is strong across the board. The Department of Labor estimates that 250,000 new jobs were created in October. Every industry group added new jobs, including the beleaguered retail sector. Hourly wages were up 0.2% in the month and, notably, crossed the psychologically important 3.0% level for the trailing 12 months. The strong overall report, and particularly the solid wage growth, makes a December rate hike by the Fed all but certain.

Click here to download the complete weekly report: EWMWeeklyReview 11.2.18

EWM Weekly Capital Market Highlights for Week Ended 10/26/2018

By | Financial Markets & Economy, Weekly Capital Market Updates

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • US equity markets pushed lower, with all major equity asset classes down for the week. Smaller caps outperformed larger capitalization stocks, and growth generally outperformed value. Within international equities, emerging markets outperformed both domestic and international developed markets.
  • Treasury yields fell, as investors fled to safety on concerns of market volatility and the economy. The yield on the 10-Year US Treasury Note traded at 3.07% on Friday afternoon.
  • Commodities declined, with the Bloomberg Commodity Index falling 1.3%. Within the index, oil prices turned higher Friday, but were still down for the third week in a row, as global demand concerns weighed on future energy demand.
  • In other economic news, US unemployment claims rose last week, in part due to slowdown effects after hurricanes Florence and Michael. However, the unemployment rate remains near a 45-year low, at 3.7%.

Click here to download the complete weekly report: EWMWeeklyReview 10.26.18

EWM Weekly Capital Market Highlights for Week Ended 10/19/2018

By | Financial Markets & Economy, Weekly Capital Market Updates

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • Among equities, small caps outperformed large caps; value stocks beat growth stocks; international stocks trailed US stocks; and emerging markets underperformed developed  markets.
  • Treasury yields edged up. The yield on the 10-year US Treasury Note ended the week at around 3.2%.
  • Commodity indices little changed. Gold price rose, whereas crude oil prices fell.
  • Dollar indices rose. The dollar appreciated against most major currencies during the week.
  • Among major economic data, September retail sales rose 0.1% from August, well below expectation; initial jobless claims fell by 5,000 from last week to 210,000; September existing home sales fell 3.4% from August.

Click here to download the complete weekly report: EWMWeeklyReview 10.19.18

EWM Weekly Capital Market Highlights for Week Ended 10/11/2018

By | Financial Markets & Economy, Weekly Capital Market Updates

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • Global equities followed the US lead for the week, with European markets down roughly 4% and Asian markets down more than 5%. Emerging markets equities also were down more than 5%, led by China at -6.7%. The Latin American markets were the only positive region for the week, driven by a post-election rally in Brazil.
  • Treasury yields mostly lower. After last week’s sharp rise, Treasury rates fell back in a shortened week of trading. Both 10-year and 30-year yields were down roughly eight basis points to 3.16% and 3.33%, respectively. Treasury notes from 3-months to 1-year were up 2 to 4 basis points.
  • The US Dollar Index was modestly lower on the week. A slight weakening against both the euro and yen was partially offset by strength against the Chinese yuan.
  • Crude oil finished the week down more than 3% after a modest rise in the first half of the week. Falling global equity prices and rising supplies were the driving factors in the Thursday sell-off.
  • Among other economic data released this week: The IMF cut its forecast for global growth by 0.2% to 3.7% for both 2018 and 2019. Several banks opened up the third quarter earnings season with upbeat reports. JPMorgan Chase, Citigroup, Wells Fargo, and PNC Bank all reported increases in net earnings.

Click here to download the complete weekly report: EWMWeeklyReview 10.12.18

EWM Macro View-September 2018

By | Monthly Commentary

Domestic equities ended mixed for the month of September, as the S&P 500 finished in positive territory, whereas small cap stocks and even several large cap sectors experienced losses. With the continued upward trend for the S&P 500 Index, September brought new record highs for the index, although small caps ended the month in negative territory, falling from record highs set at the end of August. In light of the recent high, it may be worthwhile to reflect on how far stocks have come over the past decade, as September marked the ten-year anniversary of the start of the 2008 financial crisis. It also marks ten years since Lehman Brothers, a 158-year old company, was forced to file for bankruptcy protection, the largest US bankruptcy ever. For context, during the month of September 2008, the S&P 500 Index fell roughly 9% to 1,166. Ten years later, the index has climbed to nearly 3,000. However, the recent high valuations may be giving market participants pause, as they wonder how much longer this bull market can continue, especially as the Federal Reserve (Fed) continues to tighten monetary policy.

 

As was widely expected in September, the Federal Open Market Committee (FOMC) voted to increase the federal funds target range on overnight rates by 25 basis points, to a range between 2.00% and 2.25%, its third rate increase of the year. The trade wars continue to escalate, with China’s State Council accusing the Trump Administration of being a trade bully, as new tariffs on $200 billion worth of Chinese goods and China’s retaliatory on $60 billion worth of US products went into effect. Negotiations between the two countries have ceased for the time being, after Beijing decided not to send a delegation to Washington.

 

For the month, the S&P 500 Index and the Dow Jones Industrial Average (DJIA) returned 0.6% and 2.0%, respectively. This brings the year-to-date gain for the S&P 500 to 10.6% and the DJIA return to 8.8%. However, the tech-heavy NASDAQ declined by 0.7%, bringing its year-to-date return to 17.5%. Within domestic stocks, large cap outperformed small cap equities, as the Russell 1000 Index returned 0.4% and the Russell 2000 posted a loss of 2.4%. Mid cap stocks also outperformed small caps, with the Russell Mid Cap Index losing only 0.6%. Growth stocks continued to outperform value, albeit by a much slimmer margin, as the Russell 3000 Growth Index returned 0.3% compared with a flat month for the Russell 3000 Value Index. Sector performance was mixed, with the Telecommunications sector (which now becomes the Communication Services sector) had the best results, a gain of 4.3%, followed by Health Care at 2.9%, and Energy, which gained 2.6%. On the negative side of sector performance, Financials and Materials struggled, producing returns of -2.2% and -2.1%, respectively. The Bloomberg Commodity Index generated solid performance, with a return of 1.9%.

 

International equities snapped back from losses in August to post slight gains in September, as the MSCI ACWI ex USA Index gained 0.5% and MSCI EAFE gained 0.9%. European Central Bank (ECB) President Mario Draghi reported that the ECB will continue with plans to phase out monetary stimulus as wages and inflation increase. Additionally, Draghi reported that households across the eurozone have experienced their highest growth of disposable income over the last ten years. Although the eurozone economy has slowed slightly over the past year, labor markets remain tight, as some countries and sectors are showing labor shortages, leading the ECB to expect a pickup in inflation. The Brexit negotiations added to uncertainties in the international markets. British Prime Minister Theresa May reported that negotiations are at an impasse, and that Britain stands ready to leave the European Union before a deal is in place. Emerging markets continued to struggle, with a loss of 0.5% (a better return than in prior months), as MSCI Emerging Markets Latin America and MSCI Emerging Markets Eastern Europe added to results. On a year-to-date basis, emerging markets are down 7.7%. Regionally, Japan posted strong results in September, gaining 3.0%, whereas China, which declined 1.4%, continued its poor performance and brought its year-to-date return to -7.5%.

 

Fixed income experienced some weakness, with mostly negative returns across the asset class for the month of September. Although the Bloomberg Barclays U.S. Aggregate Bond Index fell 0.64% for the month, it had a positive return of 0.02% for the quarter, and declined 1.6% on a year-to-date basis. The yield on the 10-Year Treasury Bond increased by 21 basis points, despite a slight decrease after the Fed increased rates. Corporate high yield posted positive performance, returning 0.6% for the month, and bringing its year-to-date gain to 2.6%. Gross domestic product (GDP) increased at a 4.2% annualized rate over the second quarter, and the Fed estimates that GDP will increase to 3.1% for the full year. The employment figures in August were strong: The unemployment rate held at 3.9%, nonfarm payrolls grew by 201K, and average hourly earnings grew by 2.9%.

 

Global bonds trailed domestic fixed income, as the Barclays Global Aggregate ex-U.S. Index declined 1.1%, bringing its year-to-date return to -3.0%. Municipal bonds also generated negative returns, and were roughly in line with their taxable counterparts, with the Bloomberg Barclays Municipal Index returning -0.7% for the month. Within the municipal space, the shorter-term securities fared better, with the 1-3 Year Index beating the 22+ Year Index by 64 basis points.

EWM Weekly Capital Market Highlights for Week Ended 10/04/2018

By | Financial Markets & Economy, Weekly Capital Market Updates

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • Among equities, large caps outperformed small caps; value stocks beat growth stocks; international stocks trailed US stocks; and emerging markets under-performed developed markets.
  • Treasury yields surged. The yield on the 10-year Treasury jumped above 3.2%, a 7-year high.
  • Commodity indices rose, driven by rising crude oil prices.
  • Dollar indices rose, driven by surging Treasury yields.
  • Among major economic data, the September unemployment rate fell to 3.7%, a 48-year low; the September non-farm payroll increase was less than expected, but the increase of the previous two months was revised sharply upward; the September ISM  Manufacturing Index remained robust at 59.8, and the September ISM Non-Manufacturing Index jumped to 61.6, a 20-year high.

Click here to download the complete weekly report: EWMWeeklyReview 10.5.18