US large cap growth stocks’ long run of outperformance versus value has recently shown signs of a reversal. Valuation differentials remain meaningful, and may pressure growth further despite a generally supportive macro environment. In our view, investors should be aware of stylistic imbalances in their portfolios, and prepare for a regime change in growth-versus-value performance trends.
Investors continued to watch for signs of change in the macro and market environment through a flurry of Q3 earnings reports, economic data releases, and the US-China trade talk progress. The US stock markets shook off weak manufacturing data on the back of stronger-than-expected Gross Domestic Product (GDP) and jobs data. The S&P 500 ended up 1.49% for the week. In Europe, despite persisting global trade worries and Brexit uncertainty, the Stoxx 600 edge higher by 0.39%. Read More
Global oil prices were pressured by increasing US crude inventory and disappointing Chinese factory activity. US crude inventories rose unexpectedly by 5.7 million barrels (bbl) in the week of October 25th. Meanwhile, factory activity in China shrank for a sixth consecutive month in October. WTI and Brent ended lower $56.20 per bbl and $61.69 per bbl, respectively. Read More
A busy week of economic releases capped a volatile Treasury market. Stronger-than-expected GDP and jobs figures lifted yields on shorter-term maturities while the Federal Reserve (Fed)’s indication of an end to mid-cycle adjustment reversed gains. Uncertainty around the US-China trade deal also contributed to market pessimism. The US 10-Year Treasury yield contracted by 7 basis points (bps). In Europe, the German bund also retracted by 2 bps to -0.38%. Read More
The US dollar weakened against major currencies despite the week’s Fed rate cut, and was dragged down by renewed concerns over US-China trade and a slowing US economy. The euro appreciated 0.72% against the dollar as investors anticipated a bottoming to European growth following recent GDP releases from France and elsewhere in the euro zone. Read More
The US economy grew an annualized 1.9% in Q3, reflecting a moderate slowdown from Q2’s 2.0%. This better-than-expected growth is supported by consumers and government expenditures, but business investments continued to decline. Euro area Q3 GDP growth was +0.2% QoQ, above expectations but unchanged from Q2. Read More
The US October ISM manufacturing PMI came in at 48.3, its first increase in six months. Gains were driven by new orders and employment. In China, the Caixin manufacturing PMI came above expectations at 51.7 in October, supported by stronger production and new orders. Read More
The Fed lowered the target funds rate range 25 bps to 1.50% -1.75%, as widely expected. Chairman Powell signaled the Fed is unlikely to make further changes as long as conditions remain steady, and would need to see a ‘really significant’ rise in inflation for a rate hike. The September core PCE increased moderately 1.7% YoY, below the Fed’s 2.0% target. Read More
The US job market remained healthy in October. The unemployment rate ticked higher to 3.6% from 3.5%, remaining near the lowest level in 50 years. The US economy added 128K jobs, a pace well above expectations of 75K. Read More
For style performance, Large, Mid, and Small refer to the Russell 1000, Russell Midcap, and Russell 2000 indices, respectively. Value refers to companies with lower price-to-book ratios and lower expected growth values, and Growth refers to higher price-to-book ratios and higher forecasted growth values. Government, Corporate, and High Yield refer to the US Treasury index, the US Corporate Credit index, and the US High Yield index, respectively. Short, Intermediate, and Long refer to the Short, Intermediate, and Long segments of their respective curves. Quality returns refers to the credit quality of asset classes ranging from Government, highest quality, to High Yield, lowest quality.
ISM Non-Manufacturing (Cons: 53.4, Prior: 52.6)
China FX Reserves (Cons: $3099.00B,
UMich Cons. Sentiment (Cons: 95.5, Prior: 95.5)
China CPI YoY (Cons: 3.2%, Prior: 3.0%)
BoE Rate Decision
“Euro PMI” refers to the Markit Eurozone Composite Purchasing Managers’ Index. “Cons. Conf.” refers to US Consumer Confidence. “GE IFO Business” refers to the German Ifo Business Climate Survey. “New Home Sales” refers to US New Home Sales (MoM). “Dur. Gd. Ord.” refers to US Durable Goods Orders. “UK GDP” refers to the QoQ estimate of the United Kingdom’s Gross Domestic Product for Q3. “Euro M3” refers to the YoY change in the Eurozone’s M3 Money Stock. “US GDP” refers to the estimate of US Gross Domestic Product for Q3. “Pers. Cons.” refers to US Personal Consumption. “UMich Cons. Sent.” refers to the University of Michigan Consumer Sentiment Index. “Japan Core-Core CPI” refers to Japan’s Consumer Price Index (ex- Food, Energy YoY).
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