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MARKET MONITOR 
|
February 19

MARKET MONITOR | February 19

Chart of the Week


HOUSING

In 2020, US mortgage originations approached the 2003 peak as mortgage rates fell to record low levels. While the volume of originations may be similar, the composition of borrowers is healthier this time. The credit scores of 71% of borrowers in Q3 2020 was above 760 (vs. 31% in 2003). In our view, this reflects a strong housing market and a potential source of US economic stability.

Source: Federal Bank of New York. As of February 19, 2021.

Market Summary


GLOBAL EQUITIES

Global stock markets were mixed as government bond yields rose rapidly and near-term inflation concerns weighed on risk assets. Despite a stronger economic outlook as noted in the January FOMC minutes, US stock markets wavered as the 10-Year yield reached 1.3% for the first time. The S&P 500 ended -0.68% lower, recovering earlier losses after Treasury Secretary Yellen emphasized the need for a sizable fiscal stimulus for economic recovery. The Euro STOXX 600 and FTSE 100 fared better, ending up 0.26% and 0.70%, respectively. Read More

COMMODITIES

The oil price rally continued as Texas shale supplies were hit by the winter storm. WTI prices jumped above $60 as frigid weather in the US boosted fuel demand while daily oil production slumped by 40%. WTI and Brent hit a 13-month high mid-week and ended at $59.24 per barrel (bbl) and $62.91 per bbl, respectively. Read More

FIXED INCOME

Sovereign yields jumped last week on the back of strong economic momentum, vaccine optimism, and stimulus support. The US 10-Year yield rose 15 basis points (bps) to 1.35% and the 2-10 curve steepened to 124 bps. The reflation trade was also present in Europe, with the 10-Year UK Gilt yield up 18 bps to 0.70% and the German Bund yield up 13 bps to -0.30%. Italian BTP yields also surged, with the 10-Year up 14 bps despite strong demand for new issuance under the leadership of former European Central Bank chief Mario Draghi. Read More

FX

The British pound continued its strong start to the year, finishing the week up to 1.4014 GPB/USD. As the UK has now vaccinated more than 25% of its population and COVID-19 new cases continue to decline, more restrictions are being removed. A weak jobs print weighed on the US dollar, and it finished the week down -0.19% against a basket of peers. Read More

Economic Summary


GROWTH

Euro area Q4 GDP contracted -0.6% quarter-over-quarter, shrinking less than expected. Growth in Spain and Germany accounted for the positive surprise while France, Italy, and the Netherlands posted negative growth. Read More

INFLATION

The US PPI rose +1.3% in January, reflecting the largest increase since 2009, mainly driven by energy prices. The UK CPI rose +0.7% year-over-year (YoY) in January, above expectations of +0.5%, driven by services inflation. In Japan, core-core CPI, which excludes food and energy components, turned positive at +0.1% YoY, after two consecutive negative readings Read More

PRODUCTION

Philly Fed Manufacturing Index came in at 23.1 (-3.5pt) in February as the pace of expansion slowed. Euro area manufacturing Purchasing Managers' Index (PMI) rose to 57.7 in February beating consensus by 3.4pt while industrial production decreased by -1.6% in December, falling more than expected. Read More

JOBS

US initial jobless claims increased to 961k for the week ending February 13, below consensus expectation. While the 4-week moving average decreased by 4k to 833k, jobless claims remain at an elevated level. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
7.06%
5.80%
4.62%
Medium
8.68%
8.47%
8.09%
Small
9.83%
9.37%
8.95%
Value
Core
Growth

YEAR-TO-DATE

Large
6.08%
4.92%
3.84%
Medium
8.43%
8.18%
7.73%
Small
15.61%
14.88%
14.20%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
5.58%
5.21%
4.85%
Medium
7.19%
7.00%
6.79%
Small
7.52%
7.32%
7.13%
Value
Core
Growth

YEAR-TO-DATE

Large
4.24%
4.05%
3.86%
Medium
7.38%
6.53%
5.56%
Small
9.15%
9.54%
9.94%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-0.15%
-0.50%
-5.42%
Corporate
0.03%
-0.34%
-2.76%
High Yield
0.94%
0.86%
1.99%
Short
Intermed.
Long

YEAR-TO-DATE

Government
-0.18%
-0.75%
-8.83%
Corporate
-0.02%
-0.72%
-5.37%
High Yield
1.65%
1.22%
2.15%
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-0.12%
-0.65%
-3.37%
Corporate
0.02%
-0.29%
-1.80%
High Yield
1.02%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
-0.23%
-0.91%
-4.65%
Corporate
0.04%
-0.33%
-2.43%
High Yield
1.47%
??????
??????
Short
Intermed.
Long

Source: Bloomberg, Barclays and GSAM (as of 02/19/21)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Feb 22

Germany Ifo Business (Cons: 90.5, Prior: 90.1)

Tuesday, Feb 23

Wednesday, Feb 24

Thursday, Feb 25

US Jobless Claims (Cons: 840k, Prior: 861k)
Eurozone M3 Supply (Cons: 12.5%, Prior: 12.3%)

Friday, Feb 26

US Core PCE (Cons: 1.4%, Prior: 1.5%)

VIEW LESS DISCLOSURE

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