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MARKET MONITOR 
|
July 24

MARKET MONITOR

Chart of the Week


POLICY

The Federal Reserve’s policy response time to the COVID-19 crisis has been swift and aggressive. As shown in the chart, the Fed expanded its balance sheet by 84% within six months following February’s market peak, posting its highest balance of $7 trillion. In comparison, the Fed introduced asset purchases 11 months after the market peak during the 2008 global financial crisis, only expanding its balance sheet to a peak balance of $2 trillion.

Source: FRED and GIR. As of June 30, 2020.

Market Summary


GLOBAL EQUITIES

US equities moved lower last week, following heightened tensions in US-China relations, disappointing Q2 technology earnings, and an increase in jobless claims. The market continued to anticipate a ‘Phase 4’ fiscal stimulus in the US, though unemployment benefits and payroll tax cuts reflect sticking points. Meanwhile, in a historic demonstration of European debt integration, the EU reached a new recovery plan and a 2021-2027 budget sized at €1.8tr, with €750bn dedicated to joint COVID-19 relief. Both the S&P 500 and Euro Stoxx 600 closed -0.27% and -1.43% lower, respectively. Read More

COMMODITIES

WTI and Brent oil prices increased 1.72% and 0.46%, respectively. Hopes for a demand recovery boosted market sentiment, but it was offset by a rise in US crude inventories of 4.9 mn barrels. Additionally, gold soared 4.99% on a weakened dollar to an all-time high of $1834 per troy oz. Read More

FIXED INCOME

The flight to safe-haven assets continued this week following heightened US-China geopolitical tensions coupled with concerns surrounding delayed state reopenings. The US 10-year Treasury yield reached a 3-month low, declining to 0.59% on the back of a less favorable jobless claims print. Similarly, the UK 10-year Gilt yield dipped to an all-time low before rebounding slightly and ending at 0.14% as investors continue to fear the dual effects of Brexit and the COVID-19 pandemic. The drop in UK rates comes amid investor speculation around the possibility of sub-zero interest rates in the coming months. Read More

FX

The euro rallied this week, with the EUR/USD exchange rate surging to highs unseen since 2018. The euro appreciated 1.75% against the US dollar, as investors looked for safety in the euro while USD outlook remained plagued by geopolitical and coronavirus-related uncertainties. Read More

Economic Summary


JOBS

Initial jobless claims for the week rose for the first time in four months, jumping to 1.42 mn as some states hit pause on reopening. The sudden rise reversed the steady decline in claims since March, signaling a bumpy road ahead toward labor market recovery. However, shrinking insured unemployment suggests that those previously laid off are slowly being rehired. Read More

SENTIMENT

July’s German GfK Consumer Climate Index surpassed consensus expectation, climbing for the third consecutive month to -0.3 points. Tailwinds from stimulus measures boosted economic activity toward pre-lockdown levels. Read More

MANUFACTURING

In the Euro area, the Composite PMI improved by 6.3 points to 54.8 in July reaching a 25-month high, notably above market expectations of 51.1. This first reading above 50 since February reflects easing lockdown policies across the Euro area, as businesses return to more normal conditions. At a component level, the recovery was broad-based, and slightly stronger in services. In the UK, the composite PMI also came in stronger than market expectations, printing at 57.1 in July from 47.7 a month ago. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
4.16%
3.95%
3.75%
Medium
4.17%
4.21%
4.29%
Small
1.70%
1.86%
2.02%
Value
Core
Growth

YEAR-TO-DATE

Large
-12.77%
1.03%
13.93%
Medium
-14.67%
-5.30%
8.63%
Small
-22.20%
-11.36%
-1.10%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
3.74%
4.06%
4.36%
Medium
4.20%
4.66%
5.16%
Small
2.84%
3.68%
4.48%
Value
Core
Growth

YEAR-TO-DATE

Large
-14.10%
-1.15%
12.56%
Medium
-18.05%
-5.35%
5.17%
Small
-20.13%
-9.66%
0.84%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
0.03%
0.11%
3.34%
Corporate
0.59%
1.20%
6.12%
High Yield
2.86%
3.65%
5.73%
Short
Intermed.
Long

YEAR-TO-DATE

Government
4.26%
5.94%
25.25%
Corporate
3.89%
5.48%
12.84%
High Yield
-2.59%
-0.91%
11.18%
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
0.02%
0.32%
1.42%
Corporate
0.53%
1.24%
2.77%
High Yield
1.97%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
-0.12%
1.42%
6.21%
Corporate
-0.28%
-0.20%
2.18%
High Yield
-3.36%
??????
??????
Short
Intermed.
Long

Source: Bloomberg, Barclays and GSAM (as of 07/24/20)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Jul 27

Eurozone M3 Supply (Cons: 9.3%, Prior: 8.9%)
Germany Ifo Business (Cons: 89.2, Prior: 86.2%)

Tuesday, Jul 28

US Cons. Conf. (Cons: 94.8, Prior: 98.1)

Wednesday, Jul 29

Thursday, Jul 30

US Jobless Claims (Cons: 1450k, Prior: 1416k)

Friday, Jul 31

US Pers. Income (Cons: -0.5%, Prior: -4.2%)
US Pers. Spend. (Cons: 5.5%, Prior: 8.2%)
UMich Cons. Sent. (Cons: 72.7, Prior: 73.2)

VIEW LESS DISCLOSURE

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