The Endowment Index™ Posted a Gain For Week Ended 9/14/18

By | Endowment Index™

The Endowment Index™ calculated by Nasdaq OMX® (Symbol: ENDOW) closed at 1,269.23 Friday, rising from last Friday’s close of 1,253.92.

The Endowment Index™ represents the investable opportunity for managers of portfolios utilizing the Endowment Investment Philosophy or otherwise incorporate alternative investments within a comprehensive asset allocation strategy. The Endowment Index measures performance for a multi-asset, globally-diversified, three-dimensional portfolio that includes Global Equity, Global Income, and Alternative Investments (like Private Equity, Hedge Funds and Real Assets). The Index uses an objective, rules-based construction methodology based upon the portfolio allocations of over 800 educational institutions managing over $500 billion in total assets. Each of the 19 sub-indexes that currently comprise the index are investable, and contained within those sub-indexes are over 30,000 underlying securities. You can obtain real-time pricing data on the Endowment Index under the symbol “ENDOW” through major quote providers, including Bloomberg, Google Finance and others. The Morningstar® Index ID for the Endowment Index is F00000TPG6.

Past performance is not necessarily indicative of future results. You cannot invest directly in an index. Indexes do not contain fees.

EWM Weekly Capital Market Highlights for Week Ended 09/14/2018

By | Financial Markets & Economy

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • Global equity markets were mostly up on the week through Thursday. Developed European markets posted the best returns, which fell in the low-single digits. Greece and India posted the worst returns, falling by over 2%.
  • The Treasury yield curve stayed essentially constant through Thursday. Yields on notes and bonds with maturities longer than two years rose marginally. Inflation decelerated in August, as headline Consumer Price Index (CPI) was up 2.7%. According to data in the US Department of Labor, decelerating medical cost increases, falling apparel prices, and steady food costs led inflation to come in below consensus expectations. Core CPI, which strips out volatile food and energy price shifts, also fell below expectations and increased 2.2% year over year through August.
  • Commodities were broadly up on the week. Energy, Livestock, and Precious and Industrial Metals rose through Thursday. Agriculture fell, as declining corn, soy, and wheat prices pulled this sector down due to robust harvest projections.
  • The US Dollar fell this week against a basket of major trade partners’ currencies. However, the US Dollar Index remains stronger than it was at any point in 2018 prior to July.
  • In other economic news: The Federal Reserve’s (the Fed) assets totaled $4.211 trillion on September 12. This figure is up slightly from last week, as reserves rose and the mortgage-backed security (MBS) roll-off has fallen behind schedule, but is down roughly $250 billion from October 2017, when the Fed began to trim its balance sheet. The NFIB Small Business Optimism Index stands at a record high.

Click here to download the complete weekly report: EWMWeeklyReview 9.14.18

EWM Macro View-August 2018

By | Monthly Commentary

The domestic equity market continued to roll right along in August, driven by the Information Technology, Health Care , and Consumer Discretionary sectors. Given the much higher representation of these sectors in the growth indices, it is no surprise that growth outperformed value across the market cap spectrum. The Energy sector was the worst performer  for the month, driven by the falling price of oil from its early August highs. This is the fourth consecutive month of positive returns for the large cap indices and the sixth consecutive month for the small cap indices. Positive earnings reports, particularly in the first half of the month, and a strong GDP report allowed investors to shrug off headlines of increasing trade tensions, weaker-than-expected growth outside of the US, and general geopolitical instability. Valuations remain high, particularly in the large cap space, but most of the managers we spoke to this past month continue to believe the company fundamentals support these valuations.

 

Small caps, as represented by the Russell 2000 Index, led the way, up 4.3% for the month, whereas the Russell 1000 Index was up 3.4%. As noted, the growth versions of the index  outperformed in August, with the small cap growth index up 6.2% and large growth index up 5.5%. The Bloomberg Commodity Index as a whole was down ̵1.8%, and the Dow Jones U.S. Select REIT Index was up 3.0% for the month.

 

The international equity markets1 were quite another story, as the EAFE Index was down 1.9%. Uncertainty around Italy’s budget plans (and the subsequent spike in the 10-year Italian government bond), worries over possible contagion from the currency crisis in Turkey, and escalating global trade tensions were all drags on performance. European markets were down 2.8%, with Italy (-9.5%), Spain (-5.9%), and the UK (-4.2%) being the leading detractors. Japan, despite its continued struggle to generate any significant economic growth, was one of the few bright spots, up 20 basis points on the month. The emerging markets were the bigger story during the month, as the MSCI EM Index declined 2.7%. The situation in Turkey intensified in August, as the US announced the doubling of tariffs on Turkish steel and aluminum imports because of the detainment of a US citizen in Turkey. This put further pressure on the stock market, which was down 29% during the month and more than 50% for the year. The Turkish lira also was down 25% in August against the dollar, as the country is running a significant current account deficit, and inflation hit almost 16% in July. Elsewhere, the Latin American markets were down more than 8%, Russia dropped by just under 7%, and Greece declined 10%.

Domestic fixed income markets2 posted modest returns in August, as interest rates fell during the first three weeks before bouncing slightly higher over the last ten days of the month. The yield on the 2-year Treasury Bill ended five  basis points lower, the yield on the 10-year Treasury Note was down ten basis points, and the yield on the 30-year Treasury Bond declined by six basis points. US economic data continued to show strength, but global crises, as noted above, created much higher demand for Treasurys in a flight to safety. Both corporate bonds (+49 basis points) and MBS securities (+61 basis points) underperformed Treasurys (+76 basis points). Higher-quality investment grade corporate bonds outperformed their lower-quality siblings, as spreads widened slightly. Counterintuitively, high yield bonds (+74 basis points) outperformed investment grade corporates , primarily due to the higher coupon income.

 

The municipal bond market struggled for the first time since April, as muni yields did not fall along with Treasury yields in the first three weeks of the month, but did rise over the last ten days of the month, particularly in the short end of the yield curve. New supply in the municipal bond market remains scarce, whereas municipal mutual funds received steady inflows throughout the month. However, institutional owners (primarily banks and insurance companies) continue to trim their holdings in response to their lowered tax rates. Returns were slightly negative across the first five years of the municipal indices, whereas the 10-year index  was up 31 basis points, and the long maturity (22 years and longer) index was up 41 basis points. High yield munis continued their strong year, up 80 basis points in August and 4.9% for the year.

 

International developed bond markets  were down slightly during August, with the Global Aggregate Index (excluding US securities) posting a loss of 31 basis points. Falling rates within the core eurozone  were offset by a rise in yields in the European periphery, driven by concerns surrounding the levels of Turkish debt held by Spanish and Italian banks, and Japanese Government Bond yields remained flat. The euro and yen were largely flat versus the US dollar throughout the month; however, the British pound sterling and Australian dollar depreciated, resulting in the dollar-hedged index posting a modest five-basis-point return. Emerging markets bonds  were turbulent during the month, following solid performance in July. Country-specific headlines, most notably in Turkey and Argentina, have fueled a crisis of confidence in  the asset class, with local currency assets taking the brunt of the blow (-6 .1% versus -1.7% for dollar denominated debt, and ̵1.0% for EM corporates). The asset class as a whole has struggled year to date , but many non-US fixed income managers continue to believe the majority of issuers remain fundamentally sound and offer attractive relative value, though they expect the market to remain volatile over the near term.

EWM Weekly Capital Market Highlights for Week Ended 09/07/2018

By | Financial Markets & Economy

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • Among equities, Italy was the only winner for the week, as shares slid globally. US shares were down roughly 1%, depending on market cap, whereas European markets were down 2%-3%. Emerging markets continued to struggle, down nearly 4% on the week, led by Greece, which was down more than 7%.
  • Treasury yields jumped. Treasury yields were higher by two to five basis points across the yield curve before the employment report was released Friday morning. After the release, yields rose an additional five to eight basis points in early trading.
  • The US Dollar Index was largely unchanged at the end of a relatively volatile week. A modest rally early in the week was reversed on Wednesday and Thursday, as investors waited for the release of Friday’s jobs report. Subsequent to the release, the dollar strengthened slightly against most major currencies.
  • Crude oil continued to slide from its recent peak of $70 in late August. Concerns over falling demand, due to trade disputes between the US and China and economic issues in the emerging markets, overshadowed expected supply disruptions over the next few months.
  • Among other economic data released this week: Both the ISM Manufacturing Index and the ISM Services Index jumped higher in July. The Manufacturing Index jumped nearly 3% to 61.3, and the Services Index was up 2.8% to 58.5. Unemployment rate remains unchanged; average wages jumped. The Department of Labor announced the US created 201,000 new jobs in August, in line with forecasts, and the unemployment rate remained steady at 3.9%. The big news in the report was the rise in average hourly earnings, which moved from 2.7% to 2.9% on a trailing 12-month basis. This is the highest level since June of 2009. However, inflation is also up 2.9% over the trailing 12 months, as measured by the Consumer Price Index.

Click here to download the complete weekly report: EWMWeeklyReview 9.7.18

Endowment Index™ Falls For Week Ended 9/7/2018

By | Endowment Index™

The Endowment Index™ calculated by Nasdaq OMX® (Symbol: ENDOW) closed at 1,253.92 today, falling from last Friday’s close of 1,274.90.

The Endowment Index™ represents the investable opportunity for managers of portfolios utilizing the Endowment Investment Philosophy or otherwise incorporate alternative investments within a comprehensive asset allocation strategy. The Endowment Index measures performance for a multi-asset, globally-diversified, three-dimensional portfolio that includes Global Equity, Global Income, and Alternative Investments (like Private Equity, Hedge Funds and Real Assets). The Index uses an objective, rules-based construction methodology based upon the portfolio allocations of over 800 educational institutions managing over $500 billion in total assets. Each of the 19 sub-indexes that currently comprise the index are investable, and contained within those sub-indexes are over 30,000 underlying securities. You can obtain real-time pricing data on the Endowment Index under the symbol “ENDOW” through major quote providers, including Bloomberg, Google Finance and others. The Morningstar® Index ID for the Endowment Index is F00000TPG6.

Past performance is not necessarily indicative of future results. You cannot invest directly in an index. Indexes do not contain fees.

EWM Macro View-Longest Bull Market in History

By | Monthly Commentary

Last week, the S&P 500 bull market became the longest on record, reaching 3,453 days old and outpacing the record bull run that occurred during the 1990s. Although it may seem we are light years away from both the 666 bottom the S&P 500 reached in March 2009 and the market forces that we experienced during the global financial crisis, we should remember we are not too far removed from this historic event. As we prepare to embrace the current record high and the market’s total return gain of more than 400%, let’s take a deeper look at its ride over the past nine-plus years and outline the potential for, as well as the risks of, extending the record.

 

The term ‘bull market’ is generally defined as a sustained period of a market rise of 20% from a low set at the end of a bear market, which in turn is typically defined as a 20% price decline from a previous high. Based on these definitions, the dates of bull and bear markets can be known only in retrospect. Looking back at the October 2007-March 2009 bear market, there was widespread selling, and the S&P 500 lost more than 50% of its value over the 17-month period.

 

Although the root causes of the global financial crisis have been debated widely by economists, the bursting of the housing bubble, structural weakness in the financial system, and an economic recession are usually seen as the lead factors. Two high-profile moments from the crisis were the rescue of Bear Stearns in March 2008 and the failure of Lehman Brothers in September 2008, both of which shocked market participants. Another development was the major role the Federal Reserve played: slashing interest rates to near zero, helping to facilitate major bank deals, and using other accommodative measures, including buying trillions of dollars in bonds, to help will the economy out of recession. Much of this accommodative monetary policy still remains in force today, despite several rate hikes over the past two years, and has helped propel and sustain the massive run that we have experienced.

 

Higher equity values and a prolonged bull market sound great, but is everyone celebrating? Many insiders often describe the current market as the most unloved stock rally in history. Despite strong gains, participants seem to be focused on all the risks and worries that potentially could derail the rally. There certainly has been a lack of euphoria that typically is experienced in bull market tops. Many investors also have kept the 2007-2009 period very close in their rear view. Another issue is that the market gains have been very concentrated, with the Information Technology and Consumer Discretionary sectors accounting for roughly 40% of the market’s gains. Apple has been the largest single contributor, making up roughly 4% of the gains. If investors do not own either these sectors or stocks like Apple, they are not fully participating in this rally, leaving some feeling left behind.

 

As we mark this milestone period for the longest bull market in history, it is important to remember the ashes markets rose from and also the larger factors that have been driving returns. Potential risks have been apparent in the market since it rose from the 2009 lows, but they have failed to fully overturn the bull. Despite several market pullbacks, the positives, such as strong corporate earnings, positive economic momentum, and monetary accommodation, have vastly outweighed over time the potential challenges of rising interest rates, fears of a global trade war, and other geopolitical events. There is no crystal ball to foretell when the equity rally will end, but for the time being, this record bull market rally remains intact.

EWM Weekly Capital Market Highlights for Week Ended 08/31/2018

By | Financial Markets & Economy

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • Domestic equities traded mostly higher over the week, with the S&P 500 and Dow Jones Industrial Average on track for their third straight weekly gain. Growth stocks mostly outperformed value, and large cap mostly outpaced small cap. International and emerging markets trailed domestic equities.
  • The yield on the 10-Year Treasury Note ended slightly higher on the week, after trading up to 2.9% mid-week before closing back around 2.85%.
  • Federal Reserve Chair Jerome Powell commented from the Jackson Hole Economic Policy Symposium that the central bank would likely continue with its policy tightening if the economy continued to strengthen, but that a gradual approach would remain appropriate.
  • India GDP growth hit 8.2% in the April-June quarter, its highest level in more than two years. The growth was on the back of strong core performance in manufacturing, construction, and public administration.
  • Among major economic data, initial jobless claims rose last week, increasing by 3,000 to 213,000. China’s manufacturing sector reported an improvement, with Manufacturing PMC at 51.3, up from 51.2 in July. US second-quarter Growth Domestic Product (GDP) growth revised to 4.2%. The second reading of GDP growth was revised up slightly from 4.1%. This growth is the fastest since Q3-2014, and follows a 2.2% increase in Q1. Strength from business spending on software coupled with fewer imports offset a revision to consumer spending.

Click here to download the complete weekly report: EWMWeeklyReview 8.31.18

Endowment Index™ Posts Slight Gain For Week Ended 8/31/2018

By | Endowment Index™

The Endowment Index™ calculated by Nasdaq OMX® (Symbol: ENDOW) closed at 1,274.90 today, rising slightly from last Friday’s close of 1,273.92.

The Endowment Index™ represents the investable opportunity for managers of portfolios utilizing the Endowment Investment Philosophy or otherwise incorporate alternative investments within a comprehensive asset allocation strategy. The Endowment Index measures performance for a multi-asset, globally-diversified, three-dimensional portfolio that includes Global Equity, Global Income, and Alternative Investments (like Private Equity, Hedge Funds and Real Assets). The Index uses an objective, rules-based construction methodology based upon the portfolio allocations of over 800 educational institutions managing over $500 billion in total assets. Each of the 19 sub-indexes that currently comprise the index are investable, and contained within those sub-indexes are over 30,000 underlying securities. You can obtain real-time pricing data on the Endowment Index under the symbol “ENDOW” through major quote providers, including Bloomberg, Google Finance and others. The Morningstar® Index ID for the Endowment Index is F00000TPG6.

Past performance is not necessarily indicative of future results. You cannot invest directly in an index. Indexes do not contain fees.

EWM Weekly Capital Market Highlights for Week Ended 08/24/2018

By | Monthly Commentary

WEEKLY CAPITAL MARKET HIGHLIGHTS:

  • Global equity markets were broadly up this week. US markets drifted slightly lower on Thursday, a day after the S&P 500’s bull run became the longest ever. International stocks were up modestly, and emerging markets reversed losses from last week, finishing largely in positive territory.
  • Treasury yields have remained flat this week, with the yield on the key 10-Year US Treasury Note trading near 2.82.
  • Commodities remained relatively flat, with the Bloomberg Commodity Index (the Index) finishing marginally higher after an up-and-down week. Within the Index, oil rose and headed for its first weekly gain in two months, as signs of tightened supply from the North Sea and Middle East surfaced.
  • The US dollar ended the week lower against a basket of major trade partners’ currencies. The dollar fell 0.6% following a speech from Fed Chair Jerome Powell, in which he noted “further, gradual” rate hikes moving forward, given that the economy is “strong” and can handle tighter monetary policy.
  • In other economic news, US jobless claims fell for a third consecutive week. Initial claims, a proxy for layoffs across the US, dropped to 210,000 in the week ended August 18, continuing to hover near historic lows. The unemployment rate fell to 3.9% in July, near its lowest level since April 2000, according to the Labor Department’s latest jobs report.

Click here to download the complete weekly report: EWMWeeklyReview 8.24.18

Endowment Index™ Gains For Week Ended 8/24/18

By | Endowment Index™

The Endowment Index™ calculated by Nasdaq OMX® (Symbol: ENDOW) closed at 1,273.92 today, rising from last Friday’s close of 1,257.55.

The Endowment Index™ represents the investable opportunity for managers of portfolios utilizing the Endowment Investment Philosophy or otherwise incorporate alternative investments within a comprehensive asset allocation strategy. The Endowment Index measures performance for a multi-asset, globally-diversified, three-dimensional portfolio that includes Global Equity, Global Income, and Alternative Investments (like Private Equity, Hedge Funds and Real Assets). The Index uses an objective, rules-based construction methodology based upon the portfolio allocations of over 800 educational institutions managing over $500 billion in total assets. Each of the 19 sub-indexes that currently comprise the index are investable, and contained within those sub-indexes are over 30,000 underlying securities. You can obtain real-time pricing data on the Endowment Index under the symbol “ENDOW” through major quote providers, including Bloomberg, Google Finance and others. The Morningstar® Index ID for the Endowment Index is F00000TPG6.

Past performance is not necessarily indicative of future results. You cannot invest directly in an index. Indexes do not contain fees.