Global Market Overview

Transcription

1 First Quarter 219 First Quarter 219: March Madness, or Just an Incredible Rebound? Global Market Overview MSCI All Country World S&P Russell 2 MSCI EAFE MSCI Emerging Markets MSCI ACWI ex USA Small BBgBarc Multiverse BBgBarc US Aggregate BBgBarc US Treasury ICE BofAML US High Yield BBgBarc Long US Gov/Cred BBgBarc US TIPS JP Morgan EMBI MSCI US REIT FTSE NAREIT Developed HFRI Funds of Funds % 2.1% % % 1.3% % 14. After a turbulent fourth quarter, equity markets quietly rallied, largely erasing 218 losses. The S&P, which plunged 13.% in the fourth quarter, gained 13. and is once again within striking distance of all-time highs. While risk assets posted gains across the board, the hardest-hit segments of the market during the fourth quarter were the largest rebounders, with small-cap and growth stocks leading the rally. Emerging and developed international equity, which had sold off slightly less than the U.S. market, bounced back nicely as well, both posting approximately 1 returns for the first quarter. Real estate and high-yield junk bonds also rallied. While it has been a fabulous start to the year, this turbulent turnaround is the latest of several gyrations since volatility returned to equity markets last year. After one of the longest low-volatility rallies on record, investors began fretting early in 218 about a laundry list of possible triggers that could derail global growth. Investor concerns over corporate profits, tightening central banks, and trade wars have whipsawed market sentiment. Adding to the market drama has been the will-they won t-they trade negotiations between the U.S. and China, which have recently been outdone by the will-they won t-they Brexit negotiations playing out within the United Kingdom Parliament. One source of investor strain was removed this quarter however, thanks to Federal Reserve Chairman Jerome Powell. In a press conference early in the year, Mr. Powell relayed that the Fed would be patient when raising rates going forward. In March, Mr. Powell signaled that the Fed was likely done raising rates for the year. These statements represent a far cry from the official Fed projections from 218, which had been showing the possibility of two to three rate hikes in 219 alone. Fixed income markets rallied as rates dropped across the yield curve. The 1-year U.S. Treasury yield fell to a 1- month low and the yield curve, depending on which short-term rate is used for measuring, has flirted with inversion. QTD YTD 1 Year 3 Years Years 1 Years S&P % 13.% 1.9% 8. S&P Value % % S&P Growth % 1.9% Russell % 7.1% 8. Russell 2 Value 11.9% 11.9%. 1.9%. 7. Russell 2 Growth 17.1% 17.1% 3.9% 14.9% % MSCI EAFE (USD) (3.7%) 7.3% 2.3%.1% MSCI EAFE (Local) % 8.% 6..7% MSCI Emerging Markets (USD) 9.9% 9.9% (7.) 1.7% 3.7% 7.9% MSCI Emerging Markets (Local) 9.8% 9.8% (1.9%) % 9. Bloomberg Commodity Index 6.3% BBgBarc US Aggregate 2.9% 2.9% 4.% % 3.9% FTSE NAREIT Developed %.7% % BofA ML 3-Month T-Bill. HFRI Fund of Funds.% 4.1% 2.3% 2.8% BofA ML 3-Month T-Bill.. 2.1% 1..7% 1.3% Returns for periods longer than 1 year are annualized.

2 The longest shutdown in U.S. government history came to an end after 3 days. A mere 2, jobs were added in February (the lowest number since September 217), but wage growth and jobless figures showed the continued strength of the labor market. Quarter-End Review Lyft became the first publicly traded ride-hailing company, debuting on the Nasdaq with a pre-trading valuation of $24 billion. 29. The Federal Reserve s chairman, 28. Jerome H. Powell, attempted to ease the fears of investors by suggesting that the Fed could readjust interest rates if global growth slowed. 27. The German economy had the slowest growth of any eurozone country, except Italy, at the end of 218 according to data from Germany's Federal Statistical Office. S&P Index The Federal Reserve suggested the economy is slowing more than it had previously thought and signaled little appetite for any rate increases this year. High: Year Treasury Yield % Low: /31/18 1/31/19 2/28/19 3/31/19

3 1 1 8% 1968 Civilian Unemployment Rate & Year-Over-Year Wage Growth for Private Production and Non-Supervisory Workers May Market Inflation Expectations Nov Unemployment Rate 1988 Unemployment Rate Yr Avg. June /219 12/218 3/218 3/216 3/214 Year % 1 Year Year % CPI Year-over-Year West Texas Crude Oil Consumer Sentiment Index US Corp Profits (% of GDP) --- 9% 9% 9% 1 Real GDP Growth YoY Federal Funds Rate Arrows in the top-right charts represent year on year change June Wage Growth Oct Wage Growth Yr Avg. Dec Treasury Curve Steepness 1yr Yield - 2yr Yield % 1..%. Since Mth 1 Year 3 Year Year Market Volatility CBOE Volatility Index: VIX Since Year US Treasury Yield Curve 1 Year Inflation Adjusted Gold Price per Oz. Since 1968 Global Economic Overview 2 US Unemployment Rate 2 Year 1 3/19 12/18 3/18 3/16 3/ Since Trade- Weighted US Dollar Index Since year

4 Global Market Valuations - One Year Change % % Expensive 3 2-1% 1% % % 3% % % 1% 1 1 7% % Cheap 1 9% US Large-Cap US Large-Cap US Small-Cap 1 Non-US Dev 1 Emerging Markets 11% US Treasury 7% US Corporate 2% US High-Yield 8% US REITS Shiller 1-Year S&P P/E Since 19 Trailing R1 12-Month P/E ex Negative Earnings Trailing R2 12-Month P/E ex Negative Earnings Trailing MSCI EAFE 12-Month P/E Trailing MSCI EM 12-Month P/E Since Year Treasury Real Yield Since 193 Corporate Credit Spreads Since 1996 High Yield Credit Spreads Since 1996 Since 1979 Since 1979 Since 1988 Arrows represent year on year change. Trailing 12 month P/E and cap rate metrics exclude the top and bottom %. 1-Year Treasury real yields are based on the constant maturity TIPS yields calculated by the Federal Reserve. Prior to 23, real yields are calculated by adjusting the nominal yield with the prior 12 month change in core CPI U. Real cap rates are inflation adjusted using the applicable 1-year TIPS breakeven inflation rate. Prior to 23, real cap rates are calculated by adjusting the cap rate with the prior 12-month change in the core CPI-U. P/E metrics calculated by Investment Metrics and Morningstar may use different methodology. Sources: Sellwood Consulting LLC, Robert Shiller Data, FTSE Russell, MCSI, Federal Reserve Economic Data, NAREIT FTSE NAREIT US Real Estate Index Real Cap Rate Since 1972

5 Info Tech, 19.9% Treasurys, 2.1% MSCI ACWI ex USA Region Quarter Returns Europe, 11. Corp,.1% S&P Sector Quarter Returns Health Care, 6. Agency, 1.8% Financials, 8.% MBS, 2. Commun, 14. Asia Pacific, 8. TIPS, 3. Cons Disc, 1.7% Fixed Income Sectors Quarter Returns Industrials, 17.1% Latin America, 7.9% North America, 1. US HY, 7.3% Cons Staples, 12. Far East, 11.1% Ex US Agg, 3. Energy, 16. Utilities, 11. Real Estate, 17.% Materials, 1. EMEA, 4. Em Mkts, 7. Info Tech, 17.% Treasurys, 4. MSCI ACWI ex USA Region 1-Year Returns Europe, -3. Asia Pacific, -3.8% Corp, 4.9% S&P Sector 1-Year Returns Health Care, 1 Financials, -4.7% Fixed Income Sectors 1-Year Returns Agency, 3.7% MBS, 4. TIPS, 2.7% Sector and Region Returns Cons Disc, Commun, 13.3% Industrials, 3. Far East, -6.3% Real Estate, 2.7% Utilities, 2. Cons Staples, 9.7% Energy, 1.% North America, 4.1% EMEA, -11. Latin America, -6. US HY,.9% Ex US Agg,. Materials, 1.3% Em Mkts, 4. The equity bar widths depict end of the quarter region and sector weights. Fixed income bar widths do not depict specific sector weights. Sources: Sellwood Consulting LLC, Morningstar Direct