Asset Allocation:
5% Cash | 51% Fixed Income | 44% Equity
Market recap:
A week of mixed results in US equities as Growth led market lower and Dow outperformed: SPX -.98% NASDAQ -2.53% DOW -.14% RTY -1.57%
Growth stocks were -1.5% and were outperformed by Value -.2%
Top sectors on the week: Utilities +1.2%, Cons Staples +1.1%, Indust +.6%
Worst performing sectors on week: Tech -.2.7%, Energy -2.2%, Cons Disc -1.2%
Large Cap Financials (+2.07%), Energy (+2.32%), Materials (+1.73%) and Industrials (+2.11%) were outperforming sectors and we saw rotation into cyclicals
While all sectors except Energy are positive QTD, US equities are off to a shaky start this month.
Key Themes:
Global Divergence continues to be a major theme as the gap between the US and all other markets seems to be growing.
A strong US earnings season and strong economic data have resulted in US equity and credit markets outperforming.
Tariffs and trade wars continue to dominate headlines and add to emerging market weakness.
Strong economic data, and the assumption this will lead to higher rates, continues to provide a bid for the US dollar which has further weakened emerging market.
EEM was -3.75% last week and is down 11.24% YTD
No place to hide when it comes to International and EM weakness:
·
Europe ETF -5.8%
Argentina ETF -27.6%
Italy ETF -11.2%
Turkey ETF -50.8%
Brazil ETF -18.3%
Russia ETF -7.9%
China ETF -12.6% and Japan -4.7%
With earnings season over in US, all eyes are on the December Fed meeting which has strong expectations of a raise
Attention will be back on the economic data and implication for inflation and jobs.
While US Equity markets have had a nice YTD run, valuations remain reasonable: 16.5-17x
After a couple of strong weeks of performance, Oil took a pause and was -2.9% on the week. The broader commodity space remains under pressure and is helping keep inflation in check.
2/10 year spread continues to drift lower..ended the week at 23.21
Equity volatility picked up with the equity sell off….closed the week at 14.88 and seems to be trending higher
While credit continues to remain steady, there was some weakness last week: HYG -33bp, IG -38bp, Munis -42bp. IG now -3.5% ytd
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