The S&P 500 has recovered 70%+ from its March 2020 low. While investors may be concerned about staying invested following the strong rally, history suggests that there is more room to run. During past US economic expansions, investors have enjoyed positive one-year returns 87% of the time, and >10% drawdowns only 4% of the time.
Global equity markets rallied earlier last week in anticipation of a more responsive US administration in combatting COVID-19 and in turn, reversing the economic damage. The S&P 500 retreated from its record high after disappointing tech earnings releases, but still ended 1.96% higher. In Europe, pandemic restrictions and growing infection rates reintroduced the risk of a second recession. Euro STOXX 600 and FTSE 100 ended mixed, up 0.18% and down 0.60%, respectively. Read More
Oil prices rose moderately higher on the back of increased US fiscal stimulus optimism. However, the gain was challenged by the International Energy Agency’s (IEA) downward revision on 2021 oil demand and an unexpected increase in US crude inventories. WTI and Brent crude ended flat at $52.27 per barrel (bbl) and $55.41 per bbl, respectively. Read More
Despite stronger-than-expected housing and jobless claims data, the 10-Year Treasury yield ended lower at 1.09%. In Europe, sovereign bond markets were driven by commentary from the European Central Bank (ECB), which was more flexible and less dovish than the market had anticipated. The 10-Year German bund yield rose 3 basis points (bps) while the Italian 10-Year BTP jumped 14 bps, reflecting expectations that ECB purchases will not accelerate enough to offset increasing supply and steepening pressures as economies recover. Read More
The US dollar index fell 0.51% as risk-on sentiment led traders to global markets. As British assets continued to garner interest post-free trade agreement, the pound rose 0.74% against the US dollar. The euro also rose 0.75% on the back of sovereign bond flows. Read More
US unemployment benefit filings for the week ending Jan 16 soared to 900k individuals. While the jobless claims decreased more-than-expected (by 26k) from the highest level since August, the reading remained well above the pre-pandemic peak of 695k. Read More
The ECB and Bank of Japan (BoJ) kept monetary policy accommodations unchanged. The ECB maintained its record-low policy rate and the bond-purchase program at €1.85 Tn ($2.25 Tn) per month. With weak underlying inflation dynamics, we expect the ECB to remain on autopilot until we observe vaccine-driven growth improvements in 2021. Read More
Philly Fed Manufacturing Index printed at 26.5 in January, up from 9.1 in December. The higher-than-expected reading was driven by broad improvements across all components. Meanwhile, Euro area PMI fell 1.6 pts to 47.5. The contraction was even sharper in the UK, ending at 40.6 amid ongoing pandemic related restrictions. Read More
December’s UK headline inflation printed 0.1pp above consensus at 0.6% Year-over-Year. Japan’s core inflation came in at -1.0%, its lowest reading over the last decade, driven by lower prices of durable goods and energy, as well as policy factors. 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.
Germany Ifo Business (Cons: 91.4, Prior: 92.1)
US GDP (Cons: 4.2%, Prior: 33.4%)
US Core PCE (Cons: 1.2%, Prior: 3.4%)
US Jobless Claims (Cons: 880k, Prior: 900k)
Eurozone M3 Supply (Cons: 11.1%, Prior: 11.0%)
Source: Bloomberg and GSAM. For style performance, Large, Mid, and Small for US Equity 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. For US Fixed Income, Government, Corporate, and High Yield refer to the Barclays Treasury, Barclays Corporate Credit, and Barclays High Yield indices, respectively. Short, Intermediate, and Long refer to the Short, Intermediate, and Long segments of their respective curves. For European Fixed Income, Government, Corporate, and High Yield refer to the Barclays Euro Treasury Index, the Barclays Euro Corporate Index, and the Barclays Euro High Yield Index, respectively. Quality returns refers to the credit quality of asset classes ranging from Government, highest quality, to High Yield, lowest quality. Since August 24, 2016, the Barclays indices are co-branded “Bloomberg Barclays indices”. Please see end disclosures for footnotes. Past performance does not guarantee future results, which may vary.
Access the full PDF to use with your clients
Get the latest Market Monitor delivered to your inbox as soon as it publishes