EM earnings are expected to outperform their DM peers in 2021 due to the combined tailwinds of cyclicality, commodity exposure, China sensitivity, and pockets of deep value. Even so, we believe that repeatable alpha generation in emerging markets comes from investing in companies rather than countries as the opportunity set remains highly diverse.
As of October 31, 2020. ‘EM’ refers to the MSCI Emerging Markets Index. ‘US’ refers to the S&P 500 Index. ‘Europe’ refers to the Euro Stoxx 600 Index. ‘Cumulative’ refers to the aggregate earnings impact from 2020 and 2021 combined.
Global stocks are on track to notching their best month in recent history with the MSCI ACWI index up more than 13% in November. The Euro Stoxx 600 and FTSE 100 closed up +0.93% and +0.25%, respectively. US markets closed a holiday-shortened week on strong footing with positive vaccine news outweighing a disappointing jobs release. The S&P 500 Index finished the week up +2.27%, hitting an all-time high on Wednesday. Read More
Oil prices rose for the fourth week in a row and reached their highest level since March, as a favorable supply environment coupled with vaccine prospects outweighed near-term demand concerns. The OPEC+ is meeting on November 30, and has indicated that current production cuts may be carried through Q1 2021. Brent crude ended the week at $48.18 per barrel, while WTI rose to $45.53 per barrel. Read More
Treasury yields rose this past week on the back of optimism surrounding an effective COVID vaccine and hopes that vaccinations could begin in December. The 10-year US Treasury yield rose 1 bps to 0.84%, reflecting renewed vaccine optimism and expectations that a coronavirus stimulus package could be agreed upon soon. Meanwhile, the 10-Year UK Gilt yield slipped 2 bps, as major disagreements surrounding the Brexit deal persist despite being only a month away from the deadline. The 10-year German Bund yield fell to -0.59% on expectations of further stimulus from the European Central Bank. Read More
The US dollar index hit a 2-year low this past week, declining -0.65% as risk sentiment improved. The British Sterling depreciated against both the USD and the EUR on the back of the latest Brexit talks between the EU and UK. Read More
The US Conference Board’s Consumer Confidence index posted 96.1 in November, falling 5.3 points from last month’s reading. The lower-than-expected print reflected waning consumer optimism as COVID cases continue to rise in the US. The decline was driven by significant drops in expectations for income, business and labor market conditions. Meanwhile the German Ifo business climate index deteriorated in November, its second month in a row following five consecutive months of rises, reflecting pessimistic expectations given recent COVID restrictions. Read More
The Euro area’s composite PMI declined sharply from last month’s 50.0 to 45.1 in November, below consensus expectations of 45.6. At a country level, France was a detractor while Germany outperformed, mirroring the pattern of the Euro area's first wave of COVID between March and April. Read More
US initial jobless claims rose for the second week in a row, rising sharply to 778k for the week ending November 21. Rising COVID cases continue to dampen labor market recovery, with claims far exceeding pre-pandemic levels, which averaged ~200k. 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.
US ISM Manuf. (Cons: 56.7, Prior: 56.7)
Caixin China PMI Comp. (Cons: -, Prior: 55.7)
Eur. Core CPI (Cons: 0.2%, Prior: 0.2%)
US Jobless Claims (Cons: 765k, Prior: 778k)
Nonfarm Payroll (Cons: 500k, Prior: 638k)
US Unemployment (Cons: 6.8%, Prior: 6.9%)
“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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