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MARKET MONITOR 
|
January 8

MARKET MONITOR | January 8

Chart of the Week


FIXED INCOME

Real yields on US investment grade corporate bonds have turned negative for the first time in history, reflecting the combined effects of accommodative monetary policy and a firming in inflation expectations. Against a simultaneous backdrop of all-time high duration, we believe fixed income investors need to be selective as ever.

Source: Bloomberg Barclays and GSAM. As of December 31, 2020.

Market Summary


GLOBAL EQUITIES

Global stock markets continued their 2020 rally on the prospect of a more aggressive US fiscal policy under a new Biden administration. The S&P 500 shrugged off violence at the Capitol and ended at a record-high level of 3824.68, rising 1.88% for the week. Strength continued outside the US. The FTSE 100 soared to the highest level since March, rising 6.40% for the week. Similarly, Euro STOXX 600 ended higher 3.06%. Read More

COMMODITIES

Global oil prices continued to rise on the back of tighter near-term supplies. Saudi Arabia, the world’s largest oil exporter, announced a voluntary output cut by 1 million barrels per day in February and March. Other members of OPEC+ are expected to hold output steady or make small increases in early 2021. WTI broke $50 for the first time in 11 months and ended higher at $52.54 per barrel (bbl). Brent also rose to $55.99 per bbl. Read More

FIXED INCOME

US Treasuries sold off last week after Democrats won leadership of the Senate, unifying government control. The Democratic majority raises the prospect of greater fiscal spending in the near-term, and yields climbed in anticipation of more debt and potentially more growth. The US 10-Year yield rose 20bps, breaking 1% for the first time since March. The 2s10s curve reached its steepest level since 2017 years at 97bps. Global sovereign yields moved higher as well, with the 10-Year UK Gilt and German Bund yields rising to 0.29% and -0.52%, respectively. Read More

FX

The British pound fell in its first week post-Brexit transition, down –0.76% against the US dollar. Challenges of the thin trade agreement, renewed COVID-19 lockdowns, and the specter of a negative policy rate all weighed on the sterling. The euro rose 0.2% against the US dollar and the US dollar index ended the week up 0.02%. Read More

Economic Summary


US ELECTIONS

Democrats won both runoff Senate seats in Georgia, gaining an effective Senate majority and control of the House, Senate, and White House. The prospect for greater fiscal stimulus (we estimate ~$750bn in Q1) has raised our 2021 full-year US GDP forecast to 6.4%. Read More

PRODUCTION

US December ISM surprised to the upside for both manufacturing and service sectors, both advancing against expectations for declines. The ISM manufacturing index increased to 60.7, the highest level since 2018. Non-manufacturing rose to 57.2, though showed weakness in the employment component. Read More

JOBS

The December US headline unemployment rate held steady at 6.7% as the labor market recovery continued to stall amid virus resurgence. Nonfarm payrolls fell for the first time since April, dropping by 140k. Euro area headline unemployment continued to decline from its peak at 8.7% in July to 8.3% in November. Read More

INFLATION

In the Euro area, headline and core inflation came out unchanged in December, at -0.3% and 0.2% respectively, and remained at a record low for the latter. Both readings should mechanically rebound next month upon a reversal of Germany's COVID-related VAT rate cut. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
2.95%
2.06%
1.23%
Medium
3.23%
3.19%
3.11%
Small
5.96%
5.93%
5.89%
Value
Core
Growth

YEAR-TO-DATE

Large
2.95%
2.06%
1.23%
Medium
3.23%
3.19%
3.11%
Small
5.96%
5.93%
5.89%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
3.09%
2.24%
1.40%
Medium
3.29%
3.08%
2.84%
Small
4.09%
4.12%
4.15%
Value
Core
Growth

YEAR-TO-DATE

Large
3.09%
2.24%
1.40%
Medium
3.29%
3.08%
2.84%
Small
4.09%
4.12%
4.15%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-0.17%
-0.44%
-3.94%
Corporate
-0.16%
-0.54%
-3.05%
High Yield
0.32%
0.23%
0.31%
Short
Intermed.
Long

YEAR-TO-DATE

Government
-0.17%
-0.44%
-3.94%
Corporate
-0.16%
-0.54%
-3.05%
High Yield
0.32%
0.23%
0.31%
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-0.04%
-0.04%
-0.08%
Corporate
0.05%
0.22%
0.49%
High Yield
0.62%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
-0.04%
-0.04%
-0.08%
Corporate
0.05%
0.22%
0.49%
High Yield
0.62%
??????
??????
Short
Intermed.
Long

Source: Bloomberg, Barclays and GSAM (as of 01/08/21)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Jan 11

Tuesday, Jan 12

NFIB Small Bus. Opt. (Cons: 100.3, Prior: 101.4)

Wednesday, Jan 13

US CPI YoY (Cons: 1.3%, Prior: 1.2%)
US Core CPI YoY (Cons: 1.6%, Prior: 1.6%)

Thursday, Jan 14

US Jobless Claims (Cons: 785k, Prior: 787k)

Friday, Jan 15

UMich. Sent. (Cons: 80, Prior: 80.7)
US IP (Cons: 0.4%, Prior: 0.4%)
UK IP (Cons: 0.4%, Prior: 1.3%)
EU IP (Cons: 0.2%, Prior: 2.1%)

VIEW LESS DISCLOSURE

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