Strong GDP growth and rising rates have historically led to favorable performance for value stocks. Data indicates that periods of growth underperformance relative to value (by 20-30%) have often corresponded with higher interest rates. Prospects of additional infrastructure spending and tax rate hikes may also bode well for value in the near-term. Over long-term horizons, we continue to advocate for a balance of value and growth.
US equities continued to rally last week following market expectation for inflationary pressure, driven by pent-up demand and supply constraints, to remain transitory and fade later this year. Concerns that the Fed will increase rates abated, leading the S&P 500 to rise 0.43% and reach a new record high above 4,230. The FTSE 100 ended 0.94% higher as the ECB pressed on with its plans to continue bond purchases. The Eurostoxx 600 also gained 1.11% this past week. Read More
Brent crude closed at its highest price since May 2019, as OPEC forecasted strong oil demand growth accelerated by the global economic recovery. WTI prices were supported by declines in US crude inventories and improving US labor slack. WTI and Brent crude oil prices closed at $70.91 and $72.69 per barrel, respectively. Read More
Sovereign yields fell last week as economic data supported the case for continued accommodative central bank policy. In the US, the jump in core inflation was driven by reopening categories, in line with the Federal Reserve’s expectation that price increases may be short-lived. The 10-Year Treasury fell 10bps to 1.46%, and the 2-Year held at 0.15%. Rates also declined in Europe, where the European Central Bank left all key policy parameters in place, and the 10-Year bund yield fell 6bps to -0.27%. Despite a strong April GDP report, the UK 10-Year Gilt yield eased 8bps to 0.71%. Read More
Currency markets were subdued last week as economic data and central bank policy was largely expected. The US dollar index ended the week up 0.52% against a basket of peers as cautious optimism prevailed. The British pound and euro closed at 1.4107 per USD and 1.2102 per USD, respectively. Read More
US initial jobless claims reached a new pandemic low, falling to 376k for the week ending June 5. While improving, weekly claims still post above pre-pandemic levels of 200k and job openings stands at an all-time high of 9.3 million as of April month-end. Read More
The US consumer price index (CPI) rose +5% YoY, the biggest increase since August 2008. The rise is driven by sectors most heavily impacted by the pandemic, such as airlines and car rentals. Excluding food and energy, US inflation increased +3.8% YoY, still reflective of the highest change in the past three decades. Read More
China CPI rose +1.3% YoY in May, up from 0.9% in April. While China consumer prices grew slower than expected in May, producer prices surprised to the upside rising +9.0% YoY, the fastest annual pace since 2008. This surge in factory-gate prices was driven by significant price increases in crude oil, iron ore, and non-ferrous metals. Read More
UMich Consumer Sentiment index rose to 86.4, above consensus forecast. Expectations for improved business conditions and greater optimism from middle and upper income households contributed to the gains. 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.
German CPI YoY (Cons: 2.5%; Prior: 2.5%)
FOMC Rate Decision (Cons: 0.25%; Prior: 0.25%)
UK CPI YoY (Cons: 1.8%; Prior: 1.5%)
US Jobless Claims (Cons: 360k; Prior: 376k)
“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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