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MARKET MONITOR 
|
December 1

MARKET MONITOR

Chart of the Week


Yield Curve

The yield curve has received attention this year because it has flattened 65 basis points. While the shape of the yield curve is one of the better tools for evaluating the state of the US economic cycle, markets appear distant from any potential inversion. We see the shape of the yield curve as top of mind in 2018, but would stress that the composition of economic data is largely supportive of an ongoing expansion.

Source: Bloomberg, NBER, and GSAM. As of 11/30/17.

Source: Chart shows the spread between the 10-Year and 2-Year Treasury yield. Please see page 4 for additional disclosures.

Market Summary


GLOBAL EQUITY

Events in Washington drove much of the week’s equity trading, with investors keeping a close eye on tax deliberations. The S&P 500 closed 1.6% higher and pared an early Friday loss as the U.S. Senate prepared for the vote that would pass the tax overhaul. The Stoxx 600 closed down -0.7% and the FTSE 100 ended down -1.5% as a stronger Pound weighed on UK equities. Read More

COMMODITIES

WTI Crude oil ended the week down -1.1%, though oil prices saw some support from the Thursday OPEC meeting. At the meeting, the 14-member group agreed to extend production cuts through the end of 2018. Markets have remained watchful of OPEC member compliance with agreed-upon production cuts. The IEA reported compliance with recent cut pledges at 86%, higher than with historical cuts. In the US, the oil rig count increased for a second week, reaching the highest level since September. Read More

FIXED INCOME

The US 10-year Treasury yield rose 2 basis points on the back of firmer inflation readings and the prospects of tax reform. In the UK, the 10-year Gilt mirrored strength in the Pound as it climbed to 1.33%. Progress on Brexit talks has raised the odds of another rate increase from the Bank of England. Core and peripheral yields in the Euro area eased lower as weaker inflation figures support a more dovish central bank outlook. Read More

CURRENCY

Following consecutive weeks of depreciation, the US Dollar index ended flat, supported by stronger economic data and optimism over the tax bill’s potential passage. The British Pound reached its best level in two months, on speculation surrounding a UK-EU agreement on a Brexit financial settlement. The Pound is now less than 10% off of its pre-Brexit vote levels. Risk-on sentiment paused the Yen’s rally, leaving it flat. Read More

Economic Summary


GROWTH

Q3 US GDP growth was revised up by three tenths to +3.3% – the fastest pace since 2014. In terms of the composition, personal consumption was revised down while growth in business fixed investment was revised up, and inventories contributed a tenth to the revision. Read More

MANUFACTURING

The ISM manufacturing index fell to 58.2 from 58.7 in November, slightly missing consensus. However, the index remains firmly in expansionary territory and the underlying report was favorable, with increases in the new orders and production components and a roughly stable employment subindex. Read More

CONSUMER

The index of consumer confidence rose more than markets expected in November to 129.5, with broad based strength from respondents across the assessment of current conditions, future expectations, and the labor market. Read More

INFLATION

In the Euro area, November HICP inflation came lower than expected, at +1.5% YoY, below consensus expectation of +1.6%. In Japan, the core CPI increased to +0.8% YoY, but is still less than half the central bank’s target. We believe inflation may accelerate in 2018 as the yen continues to depreciate and economic growth strengthens. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
0.05%
-0.19%
-0.42%
Medium
0.03%
-0.21%
-0.52%
Small
-0.27%
-0.46%
-0.63%
Value
Core
Growth

YEAR-TO-DATE

Large
12.08%
20.12%
28.66%
Medium
11.99%
17.18%
23.95%
Small
8.58%
14.59%
21.25%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
-0.24%
-0.35%
-0.47%
Medium
-0.38%
-0.53%
-0.64%
Small
-0.35%
-0.47%
-0.59%
Value
Core
Growth

YEAR-TO-DATE

Large
14.66%
20.22%
26.51%
Medium
17.98%
20.71%
22.81%
Small
15.68%
20.27%
25.07%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
0.05%
0.13%
1.31%
Corporate
0.07%
0.16%
0.94%
High Yield
0.03%
0.01%
-0.01%
Short
Intermed.
Long

YEAR-TO-DATE

Government
0.75%
1.24%
8.10%
Corporate
2.50%
3.78%
10.69%
High Yield
6.10%
6.75%
13.98%
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
0.04%
0.28%
0.95%
Corporate
0.05%
0.29%
0.75%
High Yield
0.03%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
-0.12%
1.36%
2.39%
Corporate
0.67%
3.50%
5.24%
High Yield
6.92%
??????
??????
Short
Intermed.
Long

Source: Bloomberg, Barclays and GSAM (as of 12/01/17)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Dec 04

US Durable Goods
(Cons: -1.0%, Prior: -1.2%)
US Factory Orders
(Cons: -0.4%, Prior: 1.4%)
Japan PMI
( Cons: --, Prior: 53.4)

Tuesday, Dec 05

Wednesday, Dec 06

China FX Reserves
(Cons: $3112.0B, Prior: $3109.2B)

Thursday, Dec 07

Friday, Dec 08

US Nonfarm Payrolls
(Cons: 199K, Prior: 261K)
Unemployment Rate
(Cons: 4.1%, Prior: 4.1%)
UMich. Cons. Sent.
(Cons: 99.0, Prior: 98.5)

VIEW LESS DISCLOSURE

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ess@gs.com
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