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MARKET MONITOR 
|
October 15

MARKET MONITOR | October 15

Chart of the Week


RATES

Recent market expectations of Federal Reserve (Fed) rate hikes have moved forward to imply liftoff in late 2022. As the chart shows, the market is currently pricing in just over 1 rate hike in 2H 2022. Though this is possible, we expect sizable fiscal drag, moderating inflation data, and a more patient FOMC reaction function may ultimately nudge initial rate hikes into 2023.

Source: Goldman Sachs Global Investment Research. As of October 14, 2021.

Market Summary


GLOBAL EQUITIES

Equities ascended as 3Q earnings kicked off in the US and economic data mostly beat expectations. Financial and healthcare companies started this earnings season strong, hoping to continue the momentum realized in 2Q. Lower than expected initial and continuing jobless claims also contributed to optimism surrounding the labor market recovery. Ultimately, the S&P 500 rose 1.84% last week. The FTSE 100 rose 1.97%, as the international index benefits from moderating but still above-trend global economic growth. Read More

COMMODITIES

Oil prices rallied last week with Brent crude notching a three-year high as tight supply continues to coincide with recovering demand. We continue to believe there is further near-term upside to crude prices as oil markets are likely to remain in deficit through the winter. WTI and Brent Crude closed at $82.28 and $84.86 per barrel, respectively. Read More

FIXED INCOME

In the US, the 10-Year Treasury yield dipped early last week but ultimately closed at 1.57%, and continued to hover at its highest level in months. Long-dated yields have been steadily moving up since the Fed’s September meeting, driven by expectations of higher rates. 2-Year Treasury yields, which tend to trade closely with monetary policy, hit a 52-week high as expectations of Fed liftoff were brought forward. Additionally, the 10-Year German Bund yield ended lower last week at -0.17%, though still hovering near its highest level since May. Read More

FX

The US dollar index traded sideways before closing at 93.95, its highest level YTD, as consumer prices outpaced forecasts and caused concern that elevated inflation may persist. In the UK, the pound climbed to a one-month high against the USD and ended at $1.3750, amidst rising expectations that the BoE may hike rates this year. Read More

Economic Summary


JOBS

Initial jobless claims resumed a downward trajectory to a pandemic low last week, dropping more than expected to 293k for the week ended October 9. The four-week moving average, which smooths out volatility, fell to 334k, its lowest since March 2020. UK employers added a record-high of 207k staff in September and the unemployment rate declined to 4.5% in the three months leading up to August. Read More

POLICY

Monetary policy continues to normalize globally with Singapore unexpectedly tightening policy and Chile’s central bank hiking for the second consecutive meeting. Read More

INFLATION

September’s US CPI rose 0.4% MoM, 10 bps higher than consensus expectations, and 5.4% YoY, the largest annual gain since 2008. The US producer price index (PPI) increased by 0.5% in September, reflecting strong increases in energy and food prices but soft core producer price inflation. China's CPI decreased to +0.7% YoY in September (vs. +0.8% YoY in August), mostly driven by food prices. Chinese PPI inflation accelerated to 10.7% YoY, a 1.2pp increase from the month prior. We expect China’s CPI to remain mild and PPI to stay elevated in the near term. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
3.91%
3.97%
4.03%
Medium
4.40%
4.27%
4.04%
Small
3.45%
2.81%
2.19%
Value
Core
Growth

YEAR-TO-DATE

Large
20.68%
19.77%
18.90%
Medium
23.45%
20.09%
14.03%
Small
27.15%
15.57%
5.07%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
3.64%
3.49%
3.35%
Medium
3.40%
3.33%
3.26%
Small
3.28%
2.81%
2.35%
Value
Core
Growth

YEAR-TO-DATE

Large
17.58%
17.20%
16.58%
Medium
19.10%
15.73%
11.61%
Small
20.49%
16.41%
12.14%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-0.34%
-0.40%
0.45%
Corporate
-0.32%
-0.38%
0.43%
High Yield
-0.01%
-0.17%
-0.33%
Short
Intermed.
Long

YEAR-TO-DATE

Government
-0.80%
-1.54%
-7.08%
Corporate
-0.11%
-0.82%
-2.14%
High Yield
5.32%
4.15%
7.02%
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
-0.02%
-0.11%
0.35%
Corporate
-0.04%
-0.31%
-0.43%
High Yield
-0.47%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
-0.48%
-1.26%
-6.23%
Corporate
0.21%
-0.25%
-3.56%
High Yield
3.21%
??????
??????
Short
Intermed.
Long

Source: Bloomberg and Goldman Sachs Asset Management (as of 10/15/21)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Oct 18

Tuesday, Oct 19

Wednesday, Oct 20

Euro Zone CPI (YoY) (Cons: 3.4%, Prior: 3.0%)
Euro Zone Core CPI (YoY) (Cons: 1.9%, Prior: 1.6%)

Thursday, Oct 21

US Jobless Claims (Cons: 303k, Prior: 293k)

Friday, Oct 22

Euro Zone Manufacturing PMI (Cons: 57.0, Prior: 58.6)
US Manufacturing PMI (Cons: 60.3, Prior: 60.7)
US Services PMI (Cons: 55.1 Prior: 54.9)

VIEW LESS DISCLOSURE

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