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MARKET MONITOR 
|
October 9

MARKET MONITOR | October 9

Chart of the Week


EQUITIES

We believe we are in the first innings of a new investment cycle. As the market transitions from the initial ‘Hope’ phase – driven by the prospect of economic recovery – into the more sustainable ‘Growth’ phase, we may experience volatility as equity returns are likely to moderate. Still, as returns transition from valuation- to earnings-led, the bull market should continue despite near-term risks in policy, the virus, and the economy.

Source: Goldman Sachs Global Investment Research. As of October 9, 2020.

Market Summary


GLOBAL EQUITIES

Markets climbed last week on hopes of an economic recovery despite near-term setbacks. In the US, equities stumbled mid-week when President Trump opted out of negotiations for further pre-election stimulus, but ultimately rallied on the prospects of an eventual package. The S&P 500 Index finished the week up 3.89%, and cyclical stocks notably outperformed their defensive counterparts by 45 bps. In Europe, stimulus optimism and stronger oil prices supported equities despite new coronavirus restrictions. Read More

COMMODITIES

Oil prices jumped as markets turned risk-on and supplies were shut off. Hurricane Delta’s approach limited output in the US Gulf, while a labor strike in Norway limited production in the North Sea, and Saudi Arabia considered production cuts. WTI and Brent crude prices finished the week up more than 9% at $40.60 per barrel and $42.85 per barrel, respectively. Read More

FIXED INCOME

US Treasury yields rose across the curve last week on hopes of fiscal stimulus progress despite a brief mid-week pause. Bond prices fell as investors anticipated that a bill of the magnitude being discussed ($1.5-$2 trillion) would require increased issuance of US government debt. US 2-year and 10-year Treasury yields ended the week 2 bps and 8 bps higher, respectively. Hopes for US fiscal stimulus also helped boost yields in Europe, with yields on the UK 10-year Gilt and German 10-year Bund rising 3 bps and 1 bps, respectively. Read More

FX

The US dollar index slipped last week, falling -0.81% as hopes for further fiscal stimulus measures saw investors moving away from the safe haven currency. In the UK, increasing Brexit pressure ahead of the upcoming October 15 deadline kept the pound range-bound against the USD, ending the week at $1.3037. Read More

Economic Summary


PRODUCTION

Industrial production (IP) in the Euro area and UK was weaker than expected in August following several months of improvement. Euro area IP fell 0.2% from the month prior, but output on the continent has recovered to approximately 90% of pre-crisis levels. In the UK, IP rose 0.7% in August versus expectations for 3.0% month-on-month growth. In China, September’s services Caixin PMI moved up to 54.8 from 54.0 for its fifth consecutive month of improvement, while the Caixin composite PMI slipped to 54.5 due to softness in manufacturing. Read More

LABOR

Initial jobless claims increased slightly for the week ending October 3, up to 840k against expectations for a decline to 820k. For the week ending September 26, continuing claims fell more than expected to ~11 million, down from nearly 12 million unemployed individuals the week prior. The August Job Openings and Labor Turnover Survey, which is posted with a one month lag, showed that job openings decreased by 204k to 6,493K in August. The hiring rate remained unchanged at 4.2%, the quits rate decreased by one tenth to 2.0%, and the layoff rate decreased by three tenths to 1.0%. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
4.33%
3.81%
3.34%
Medium
6.15%
6.08%
5.96%
Small
9.16%
8.64%
8.17%
Value
Core
Growth

YEAR-TO-DATE

Large
-7.75%
10.45%
28.49%
Medium
-7.48%
3.59%
20.71%
Small
-14.36%
-0.80%
12.36%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
3.44%
3.15%
2.91%
Medium
4.98%
4.96%
4.94%
Small
6.50%
6.29%
6.10%
Value
Core
Growth

YEAR-TO-DATE

Large
-11.37%
5.81%
24.36%
Medium
-12.70%
2.16%
15.10%
Small
-13.42%
-0.48%
12.79%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-0.13%
-0.25%
-2.10%
Corporate
0.14%
0.17%
0.07%
High Yield
1.15%
1.35%
1.45%
Short
Intermed.
Long

YEAR-TO-DATE

Government
4.24%
5.76%
18.80%
Corporate
4.37%
5.80%
8.44%
High Yield
-0.22%
1.15%
13.90%
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
0.09%
0.35%
0.89%
Corporate
0.19%
0.59%
1.18%
High Yield
1.03%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
0.04%
2.38%
9.44%
Corporate
0.28%
1.38%
4.63%
High Yield
-1.76%
??????
??????
Short
Intermed.
Long

Source: Bloomberg, Barclays and GSAM (as of 10/09/20)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Oct 12

NFIB Small Bus. (Cons: 101.0, Prior: 100.2)

Tuesday, Oct 13

US Core CPI YoY (Cons: 1.7%, Prior: 1.7%)
UK ILO Unemp. (Cons: 4.3%, Prior: 4.1%)

Wednesday, Oct 14

China CPI YoY (Cons: 1.9%, Prior: 2.4%)

Thursday, Oct 15

US Jobless Claims (Cons: 825k, Prior: 840k)
Philly Fed Survey (Cons: 14.0, Prior: 15.0)

Friday, Oct 16

US Retail Sales MoM (Cons: 0.8%, Prior: 0.6%)
US IP MoM (Cons: 0.6%, Prior: 0.4%)
UMich Cons. Sent. (Cons: 80.5, Prior: 80.4)

VIEW LESS DISCLOSURE

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