EWM Weekly Capital Market Highlights for Week Ended 08/10/2018

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  • Global equity markets were mostly up on the week through Thursday. Of major markets, Russia and Latin America lagged the most, returning -4.2% and -3.5%, respectively. On the other end, China was the market leader for the week along with other major markets in Asia.
  • The Treasury yield flattened modestly through Thursday. Yields on notes and bonds with maturities longer than three years decreased slightly, while shorter-term maturities saw a slight increase.
  • Commodities were slightly positive for the week. Energy and Gold were the largest detractors through Thursday., whereas Agriculture fared much better.
  • The US Dollar rose this week against a basket of major trade partners’ currencies. The index has experienced somewhat of a rally off lows from earlier in the year, as it seems the currency may be “winning” the trade war..
  • In other economic news: The Federal Reserve’s (the Fed) balance sheet is up $2.4 billion for the week, and assets reside at $4.258 trillion in total. However, they are down $202.4 billion from the balance sheet unwinding that began in October 2017.

Click here to download the complete weekly report: EWMWeeklyReview 8.10.18

EWM Weekly Capital Market Highlights for Week Ended 08/03/2018

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  • Domestic equities were positive for the week, with small cap stocks leading the way. International equities were down on the week, and emerging markets struggled the most.
  • Treasury yields were mostly up through end of day Thursday, with the greatest increase in yields occurring at the longer end of the curve.
  • The US dollar strengthened during the week, as the Bank of England raised rates and its hawkish remarks failed to appease investors’ concerns about the economic outlook.
  • Commodities were down overall, led by a drop in gold prices. Oil ended the week in positive territory.
  • In other economic news, the Purchasing Managers’ Index, which indicates the overall economic health of the manufacturing sector, was down to a five-month low of 55.3. The report indicates continued economic expansion despite headwinds from supply shortages, rising prices, and deteriorating exports.

Click here to download the complete weekly report: ewmweeklyreview8318

EWM Weekly Capital Market Highlights for Week Ended 07/27/2018

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  • Among equities, the emerging markets were the big winner in the week, led by Russia, India, and China. Japanese equities were up almost 2% on the week. Europe was mixed, with Germany also up nearly 2%, but Italy, Spain, and the UK were up less than 1%. US large cap equities were up about 1%, whereas small caps were essentially flat on the week.
  • Treasury yields jump. Treasury yields moved higher by 9-10 basis points across the curve this week, with the yield on the 10-Year Note flirting with the 3.0% level. Most of the increase came early in the week, as Japanese JGB’s also sold off on reports of a change being discussed in the Bank of Japan’s quantitative easing program.
  • The US Dollar Index ended a relatively volatile week largely unchanged. A modest rally on Monday and Tuesday was reversed on Wednesday on news of a “truce” with the EU on trade. It rallied again on Thursday, mostly against the euro, as the ECB left rates unchanged.
  • Crude Oil was up slightly on the week and is now up just slightly more than 15% for the year. Tensions with Iran and a labor strike on several North Sea platforms pushed prices higher, even as a strike in Norway was settled last Friday.
  • Among other economic data released this week: Durable goods orders were up 1.0% in June, but well below the expected increase of 3.7%. The US goods trade deficit widened by 5.5% in June, as exports fell by 1.5% and imports rose by 0.6%. US consumer sentiment remains high, despite falling to a six-month low in June. US GDP hits 4.1%, best in nearly four years. The initial estimate for growth in the second quarter came in at 4.1%, driven by higher consumer and government spending. The final estimate for first quarter GDP was revised higher from 2.0 to 2.2%. The trade gap narrowed in the second quarter, but primarily due to foreign buyers increasing purchases before the Administration’s new tariffs take effect later this year.

Click here to download the complete weekly report: EWMWeeklyReview 7.27.18

EWM Weekly Capital Market Highlights for Week Ended 07/20/2018

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  • Among equities, small caps outperformed large caps; growth stocks beat value stocks; international stocks essentially matched the performance of US stocks; and emerging markets under performed developed markets.
  • Treasury yields little changed. The yield on the 10-year Treasury Note stayed close to the 2.85% level.
  • Commodity indices declined slightly, dragged down mainly by sliding gold price, which hit a 52-week low during the week.
  • The dollar’s rise slowed somewhat, after President Trump complained about the strong dollar.
  • Among major economic data, retail sales surged, housing starts plunged, and jobless claims hit a multi decade low.

Click here to download the complete weekly report: EWMWeeklyReview 7.20.18

EWM Weekly Capital Market Highlights for Week Ended 07/13/2018

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  • Domestic equities remained positive for the week, with tech stocks leading the charge. Indian equities also enjoyed a healthy rally, as did Emerging Market Latin America. European markets had mixed results, with France, Germany, the UK, and Russia slightly positive, whereas Italy, Spain, and Greece turned negative. The broader emerging markets space also was positive for the week.


  • The yield on the 10-Year US Treasury Note closed roughly in line with the week’s opening yield of 2.834%, as world markets wait to see how China will react to the most recent wave of tariffs proposed by the Trump Administration.


  • The US dollar strengthened over the course of the week. A down-tick in jobless claims to the lowest level since early May continued the strengthening economy narrative.


  • Commodities were mostly lower for the week, with oil and grains being the largest drags. Precious metals were mostly positive, but gold ended the week at a slight loss.


  • In other economic news the Producer Price Index rose 0.3% in June, and 3.4% for the 12 months ended in June, the largest 12-month increase since climbing 3.7% in November 2011; Crude Inventories plunged by 12.6 million barrels during the week of July 6 to 405.2 million, 18.2% below their level a year ago; the Consumer Price Index (CPI) edged only 0.1% higher overall in June, and the Core CPI (ex food and energy) was up 0.2% ; Consumer Sentiment is easing back so far this month to 97.1, which is down 1.1 points from June.

Click here to download the complete weekly report: EWMWeeklyReview 7.13.18

KKR’s 2018 Global Macro Outlook: “Investors may not be able to get what they want, but can still get what they need”

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KKR today released the 2018 Global Macro Outlook piece by Henry McVey, Head of Global Macro and Asset Allocation (GMAA). In “You Can Get What You Need,” McVey outlines his perspective on the current investing environment.

“As we are poised to enter the 104th month of economic expansion amidst the second longest bull market on record in the United States, it is definitely harder to get ‘what you want’ when it comes to uncovering new and compelling investment opportunities. The good news is that our work shows that investors can still ‘get what they need’ in order to generate returns in excess of their liabilities.”

Overall, a major underpinning to Henry McVey and the GMAA team’s view for 2018 is that overly optimistic investors are currently overpaying for growth and simplicity in many instances, while at the same time ignoring stories with complexity, uncertainty, and/or cyclicality. Therein lies a huge, long-tailed investment opportunity to arbitrage the notable bifurcation that has already begun to occur across many parts of the global markets, according to the team.

Against this backdrop, the report outlines several actionable investment themes that multi-asset class investors should consider weaving into their portfolios in 2018 and beyond, including:

1. Equities Having More Potential Upside Than Credit

2. The Move Towards Mid-Cycle Phase of Emerging Markets Recovery

3. Central Bank Normalization

4. Shifting Preferences in Private Credit

5. Buy Complexity, Sell Simplicity

6. Experiences Over Things

7. Arrival of a Different Kind of ‘Political Bull Market’

In addition to the aforementioned themes, the report details specific macro influences that factor into the GMAA team’s updated asset allocation model for 2018, including GDP targets around the globe as well as outlook for earnings, rates, oil, cycle duration and expected returns. 

Read/Download KKR’s 2018 Global Macro Report


U.S. Markets “T+2” Shortened Settlement Begins Tuesday

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When you return from the long Labor Day holiday, your securities transactions in equities, corporate or municipal bonds, unit investment trusts, and any securities comprised of these security types will be subject to a “trade date plus 2 days” ( “T+2″) shortened settlement, from the current”T+3”.  Thus, any trades executed on Tuesday will settle on September 7.

The move harmonizes U.S. markets with most major international markets.  It is also expected to reduce risk of trade defaults and streamline capital requirements for equity clearing.

The current T+3 settlement process has been in place since 1995.

To learn more about T+2,  link to the T+2 fact sheet or visit http://www.ust2.com/.

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EWM Macro View-July 2017

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Domestic equity markets continued their move higher in July, with the major US indices closing the month near record-level territory. Market participants focused their attention on positive developments, including strong economic data, robust corporate results, and an improving global macro environment, filtering out the negative media attention on the Executive branch and Congress’s lack of progress on healthcare and tax reform. With more than two-thirds of the S&P 500 Index’s (the Index) companies having reported second-quarter earnings, fundamentals are quite strong, with the Index on track to post double-digit earnings growth, marking the second straight quarter at those levels. At its July meeting, the Federal Open Market Committee (FOMC) left its key benchmark rate unchanged and stated it will begin reducing its bond holdings “relatively soon.” The first estimate of second-quarter gross domestic product (GDP) rose +2.6%, on an annual basis, a pickup from +1.2% in the first quarter, but was slightly weaker than expected. Personal consumption, the largest part of the economy, was higher by +2.8%.

Within this context, domestic equities were mostly higher during the month. The S&P 500 gained +2.1%, pushing its year-to-date (YTD) return to +11.6%, while larger gains were seen in the tech-heavy NASDAQ Composite, which advanced +3.4% and is now up +18.6% YTD. The Russell 2000 Index of small cap stocks under-performed relative to the Russell 1000 Index of large cap stocks, with a monthly return of +0.7 %, compared with +2.0%, respectively. Growth stocks outperformed value stocks, with 124 bps of difference between the Russell 3000 Growth Index’s return of +2.52% and the Russell 3000 Value Index’s return of +1.28%. In terms of sector performance, the top performers were Telecommunications and Information Technology, with returns of +6.4% and +4.3%, respectively. Industrials and Consumer Staples were the main laggards, gaining +0.1% and +0.6%, respectively. Commodity prices rose, with the broad commodity index gaining +2.3%, while real estate investment trusts (REITs) were positive but trailed their peers.

 International equity markets mostly outperformed their domestic peers in July due to US dollar weakness and continued economic strength abroad. The MSCI World ex-U.S. Index increased by +3.0% for the month and is now up +16.2% YTD. International developed markets rallied behind continued improvement in the global economic landscape and a weaker US dollar. Preliminary readings of second-quarter Euro zone GDP growth were +0.6% quarter-over-quarter and +2.1% year-over-year, which matched expectations and was up from the first quarter. The MSCI EAFE Index, measuring performance of international developed markets, gained +2.9%. Emerging markets equities continued to post strong returns, with a gain of +6% on the MSCI Emerging Markets Index, which is now up +25.5% YTD. Regionally, China, EM Latin America, and EM Asia were the best relative performers, with returns of +8.9%, +8.3%, and +5.6%, respectively. The MSCI Europe Index gained +3.0% and is now up +18.8 YTD. Japan was the poorest relative performer but still posted a +2.0% gain.

 Fixed-income markets posted modest gains during the month. The yield on the 10-Year Treasury Note began July at 2.30% and traded in a fairly tight range before closing the month at roughly where it opened, at 2.29%. Broad-based fixed income posted modest gains, with the Barclays U.S. Aggregate Bond Index increasing +0.4% for the month, and is now up +2.7% YTD. Global fixed income markets performed better, as the Barclays Global Aggregate ex-U.S. Index gained +2.7% and is now up +9.0% YTD, with a weaker US dollar fueling much of the return. The Barclays U.S. Corporate High Yield Index increased by +1.1% and is now up +6.1% YTD. Municipals posted a gain of +0.8%, mostly outperforming their taxable counterparts, and are now up 4.4% YTD.


If You Think Stocks Are Dull, Look at the Economy

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According to Justin Lahart of the Wall Street Journal, volatility has seemingly vanished from the stock market, and the simple reason is that economy itself is so calm.

Economic volatility within the U.S. and across the globe is incredibly low, and with this low volatility comes the risk that investors may become far too complacent.

Over the past three years, the standard deviation of the annualized change in U.S. GDP has only been 1.5 percentage points, which is historically about as low has it has ever been. Amazingly enough, global GDP is displaying the same trend.

According to J.P. Morgan economist Joseph Lupton, this lack of volatility not only stems from less shakiness within individual economies, but also because they have become less correlated with one another.

From an investment standpoint, low economic volatility is a good thing, because investors get hit with fewer surprises, however, it can also lure them into complacency and leave them much more vulnerable if volatility were to increase in the future.

Link to article


EWM Macro View-December 2015

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After nearly a decade, the Federal Reserve (Fed) raised rates this week by 25 basis points. According to the Fed’s statement, this move comes after an expansion in household spending and business fixed investments, as well as declining unemployment. For years, investors have focused on when the Fed will raise rates, and with this first move, the market is beginning to digest the ramifications. In addition to the week’s rate rise, the Fed outlined expectations for a series of further rate rises in 2016 that will total 1%. That said, Eurodollar futures indicate market participants are betting that the Fed will raise rates by only another 50 basis points or so. Despite the differences in opinions between the Fed and Wall Street (and investors taking positions contrary to the old Wall Street saying “don’t fight the Fed”), the first important step has been taken: rates are rising!

Before we discuss the immediate impact of this rate rise on markets, it is important to note the discrepancy between investors’ and the Fed’s views on rates. As a reminder, Eurodollar futures allow investors to bet on the future of the London Interbank Offer Rate (LIBOR), which is the rate that banks can borrow from each other on the London interbank market. This rate ties closely with the Fed Funds Rate, except in times of heightened credit concern, such as the 2008 credit crisis, as they both are interbank lending rates. However, the Fed has more control over its rate; hence the large, and seldom seen, spread gap between the two during the credit crisis. Investors using Eurodollar futures are assuming that the Fed most likely will raise interbank rates in one year to a level that is about 53 bps higher from where they are today, rather than to the expected 1%. This is a bearish view, as futures buyers are saying, in essence, that the Fed will have to raise rates more slowly because of slowing economic activity, a point investors should note.

Despite the difference in opinions between Wall Street and the Fed on rates, the stock market’s initial reaction was positive: stocks spiked on the news that many had been anticipating for years. Investors finally gained some clarity around rates, and seemed to be relieved that there was a decision. Wednesday’s good news quickly turned sour on Thursday, as investors looked past the Fed hike and focused on the continued decline in commodity prices and slowing manufacturing measured by the Philly Fed Index. US crude oil hit a low that had been unseen since February 2009, and energy stocks were down almost 2.5%. In addition, the stronger dollar that comes with rate hikes will have a negative impact on exporters. Surprisingly, investors looked for safety in higher yielding stock names on Thursday (despite concerns amongst certain investors that these stocks would suffer during a rate rise as the quest for yield ends), and only the Utilities sector ended the day in positive territory.

After the hike, 10-year treasury yields bounced around, but declined by close of business Thursday. In other words, there was little to no impact on the 10-year bond. That said, 2-year treasury yields rose almost 8 basis points since Monday in preparation for the hike. For future home buyers, mortgage rates rose slightly: up 3 basis points, from 4.06% last week to 4.09% as of December 16, according to bankrate.com, as mortgage rates are tied more to the 10-year yield than to Fed Funds. In other words, fixed income markets have been preparing for this hike for a long time and, despite a continued debate over the long term path of Fed Funds, the bond market’s reaction was muted.

Although many investors and analysts are concerned about global growth, we view the rate hike as a positive—it provides clarity to the market and, more importantly, allows the Fed to reload. In particular, economists are concerned that if we were to enter another recession with 0% rates, the Fed would have no ammunition to stimulate the economy by lowering rates, and instantly would need to begin another round of Quantitative Easing. If rates are higher, the Fed has more tools to stimulate the economy, rather than turning back to the printing press. We must remember that we are far from normal monetary policy. Despite this week’s rate rise, the Fed’s balance sheet is still at incredibly elevated levels—almost $4.5 trillion—almost double the amount of assets it held in 2010. This week’s rate hike was a good first step, but we have a long way to go before we enter “normal” monetary policy nearly 8 years after the credit crisis began.