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Weekly Market Review
Talking Points
• Among equities, small-caps outperformed large-caps, and value stocks outperformed growth-oriented issues. Domestic stocks underperformed international equities. Developed markets outperformed emerging market stocks.
• Treasury prices advanced this week. The yield on the 10-year T-note declined.
• Commodity prices were mostly mixed on the week. Crude oil was sharply higher, precious metals posted slight gains, and grains were lower.
• The dollar was sharply lower again this week against a basket of currencies.
• Among economic data released this week, wholesale prices in the U.S. rose more than expected due to a jump in food and fuel, however, the core inflation number, which excludes food and energy, rose more modestly. Retail sales for May rose more than expected; jobless claims fell in the latest week; and consumer confidence held steady.
Weekly Highlights
• Domestic stock prices continued to consolidate this week.Despite a 1.5% rise in the S&P 500 on the Thursday – the index’s second-largest advance of the year – stock prices ended the week mixed. Future Fed policies are at the top of investors’ minds. The Fed holds its two-day policy meeting next week, and investors are anticipating any information that may indicate a scaling back of the bond-purchase program.
• Global markets were mostly lower on the week. World equity markets also gave up ground this week, as anticipation of future central bank policies seems to be driving market activity. European stocks declined for a fourth straight week due to fears that the Fed and other central banks may scale back on monetary stimulus.
• Treasury prices advance for the week. The yield on the benchmark 10-year U.S. Treasury declined this week, as investors believed that the possibility of an early scaling back of the Fed‘s bond-buying program may have been overdone.
• Commodity indices were mixed on the week. Crude oil rose to a nine-month high due to Middle East tensions, gold rose modestly, and grains were sharply lower on slowing demand and increasing supply.
Chart of the Week
June 18, 2013Weekly ReviewJune 14, 2013
EWM Weekly Market Review
2
June 14, 2013
MARKET DASHBOARD
0.7
0.8
0.9
1
1.1
1.2
1.3
May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13
Source: Bloomberg
Wealth Index|Growth of $1: Trailing 24 Months
S&P 500 Dow Industrials Small Cap EAFE Emerging Mkts.
L
S
Source: B loomberg
-0.85% -0.98% -1.11%
-0.83% -0.79% -0.74%
17.77%15.64%13.65%
One Week
Value Growth
-0.66% -0.55% -0.44%
YTD
Value Growth
15.63% 13.65% 11.63%
15.93% 15.54% 15.08%
1250
1300
1350
1400
1450
1500
1550
1600
1650
1700
Source: Bloomberg
S&P 500 Index: Trailing 180 Days
% Wgt in
S&P 500
Week %
Chg. YTD % Chg.
Consumer Discretionary 12.0 -0.61% 18.7%
Consumer Staples 10.5 -0.02% 16.1%
Energy 10.6 -0.71% 11.1%
Financials 16.6 -0.85% 20.3%
Health Care 12.7 0.11% 21.2%
Industrials 10.1 -0.54% 14.4%
Information Technology 18.0 -0.76% 8.8%
Materials 3.4 0.29% 6.4%
Telecom Services 2.9 1.57% 9.9%
Utilities 3.2 -0.26% 7.6%
Source: Bloomberg
Sector Performance: S&P/GICS Sectors
10
12
14
16
18
20
22
24
Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13
Source: Bloomberg
VIX Index: Trailing 180 Days
Last Price Change % Chg. YTD % Last Price Change % Chg. YTD %
S&P 500 1,627.60 -7.02 -0.43% 14.7% Russell Global EM 2,909.65 -108.93 -3.61% -8.5%
Dow Industrials 15,070.18 -72.04 -0.47% 15.8% 10-Year US Treas. 2.13 -3 bps NM 4 bps
Nasdaq 3,423.56 -23.85 -0.69% 14.1% DJ UBS Comm. Idx. 130.37 -0.83 -0.63% -6.2%
Russell 2000 981.38 2.07 -0.55% 15.6% Gold $1,390.09 $5.43 0.39% -17.1%
Euro Stoxx Index 291.13 -3.83 -1.30% 4.3% Crude Oil $97.85 $1.93 2.01% 4.5%
Shanghai Composite 2,162.04 -110.38 -4.86% -4.7% Dollar Index 80.63 -0.75 -0.91% 1.4%
Russell Global 1,498.55 -6.97 -0.46% 7.5% VIX Index 17.02 1.27 8.39% -8.9%Source: Bloomberg
EWM Weekly Market Review
3
134135136137138139140141142143144 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11Index S&P/Case-Shiller Home Price Index-Trailing 12 Mos.Source: Bloomberg
THE ECONOMY AND MARKETS
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13Mo
nth
ly %
Ch
g.
Producer Price Index-Trailing 12 Mos.
Headline PPI Core PPISource: Bloomberg
0
0.5
1
1.5
2
2.5
Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13
% C
han
ge Y
ear/
Year
Producer Price Index-Trailing 12 Mos.
Source: Bloomberg
A Macro View
After nearly 30 years of decreasing and then flattening interest rates, bond yields are showing signs of reversing direction. InMay, the yield on the benchmark 10-year U.S. Treasury jumped nearly half a percent to 2.13% at month-end. This rate increase negatively affected bond prices, with the Barclays Capital U.S. Aggregate Index, the broadest measure of the U.S. bond market, declining 1.8% for the month. The precipitous rise in yields was brought about in part by investor expectations that the Federal Open Market Committee (FOMC) may taper its bond-buying programs sooner than previously thought as the economy continues to improve. Indeed, in congressional testimony in May, Fed Chairman Ben Bernanke indicated that it is possible that the FOMC could move to taper purchases. It should be noted that the programs would initially still remain in place, and that the Fed would remain a net buyer of bonds once tapering begins, but the magnitude of the purchases would be scaled back.
The jump in yields also reflects a growing conviction among many investors that a significant pick-up in U.S. economic growth is coming. U.S. economic data released in May was mostly positive, especially employment and housing. The government’s jobs report not only showed that May payroll data was better than expected, but also upgraded numbers from previous months, indicating that the job market is in better shape than previously thought. On the housing front, home price appreciation not only continued to accelerate, but exceeded 10% year over year. Meanwhile, there is little sign of inflation. As a result, despite rising interest rates, the S&P 500 rose more than 2% in May, as the gains of cyclical sectors such as Financials and Industrials more than offset losses in defensive sectors and the interest-rate sensitive Utilities sector, which declined 9% during the month. This divergence in sector performance is an indication that the spike in yields in May was caused by stronger economic growth expectations rather than inflation fears.
In reaction to these developments, many portfolio managers are repositioning portfolios to reduce their U.S. interest rate exposure. This can be achieved by reducing portfolio duration, and by tilting holdings toward less interest rate sensitive securities. Bank Loans, international and emerging debt are examples of fixed-income segments that may help reduce the risk of rising rates in the U.S.
The real question isn’t will rates rise--they will--it’s the path they take to get there. If rates rise very slowly and incrementally, the impact to bond prices will be moderate. If rates spike, the impact will be more severe. The impact will also be more severe for bonds that have a higher duration (sensitivity to interest rates). Generally government bonds and longer maturity bonds have the highest durations and will be most impacted with higher interest rates. Since interest rates have been declining since the Reagan era, many investors have only experienced a declining rate environment. They are accustomed to bond values moving in only one direction: up. Fixed income is not always stable or boring and the coming years will create both challenges and opportunities in the bond markets. Bond strategies that are able to adjust to changing economic dynamics should still be able to continue to add value to client portfolios.
June 14, 2013
EWM Weekly Market Review
4
134135136137138139140141142143144 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11Index S&P/Case-Shiller Home Price Index-Trailing 12 Mos.Source: Bloomberg
THIS WEEK IN THE ECONOMY AND MARKETS
290
300
310
320
330
340
350
360
370
380
390
400
3/22 4/5 4/19 5/3 5/17 5/31
Tho
usa
nd
s
Initial Jobless Claims-Trailing 12 Wks.
Source: Bloomberg
-1.5
-1
-0.5
0
0.5
1
1.5
Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13
% C
han
ge
Retail Sales - Trailing 12 Mos.
Source: Bloomberg
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13
% C
han
ge
Business Inventories - Trailing 12 Mos.
Source: Bloomberg
-1
-0.5
0
0.5
1
1.5
Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13
% C
han
ge
Industrial Prod. (Monthly Chng)-Trailing 12 Mos.
Source: Bloomberg
-15
-10
-5
0
5
10
3/22 4/5 4/19 5/3 5/17 5/31
%
Mortgage Index (Weekly % Chg)-Trailing 12 Wks.
Source: Bloomberg
-250
-200
-150
-100
-50
0
50
100
150
Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13
$ B
illio
ns
U.S. Fed. Budget Deficit/Surplus - Trailing 12 Mos.
Source: Bloomberg
June 14, 2013
EWM Weekly Market Review
EUROZONE CRISIS
5
Last Change % Chg. YTD % Last Change % Chg. YTD %
Germany 10-Yr. Govt. 1.52 2 bps NM NM France 10-Yr. Govt. 2.11 2 bps NM NM
Greece 10-Yr. Govt. 9.87 -23 bps NM NM Ireland 10-Yr. Govt. 3.90 4 bps NM NM
Italy 10-Yr. Govt. 4.26 -6 bps NM NM Portugal 10-Yr. Govt. 6.25 -12 bps NM NM
Spain 10-Yr. Govt. 4.53 0 bps NM NM Netherlands 10-Yr. Govt. 1.89 0 bps NM NM
Belgium 10-Yr. Govt. 2.33 0 bps NM NM U.K. 10-Yr. Govt. 2.07 -1 bps NM NM
Source: Bloomberg
SELECTED EUROPEAN SOVEREIGN YIELD PERFORMANCE
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
3/18 4/1 4/15 4/29 5/13 5/27 6/10
%
Germany 10-Year Government Bond Yield
Source: Bloomberg
3.0
3.5
4.0
4.5
5.0
5.5
3/18 4/1 4/15 4/29 5/13 5/27 6/10
%
Spain 10-Year Government Bond Yield
Source: Bloomberg
3.0
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
4.8
5.0
3/18 4/1 4/15 4/29 5/13 5/27 6/10
%
Italy 10-Year Government Bond Yield
Source: Bloomberg
7
8
9
10
11
12
13
3/18 4/1 4/15 4/29 5/13 5/27 6/10
%
Greece 10-Year Government Bond Yield
Source: Bloomberg
June 14, 2013
EWM Weekly Market Review
EQUITIES
6
2,900
3,000
3,100
3,200
3,300
3,400
3,500
3,600
3/15 3/29 4/12 4/26 5/10 5/24 6/7
Ind
exNasdaq Composite-Trailing 90 Days
Source: Bloomberg
2,050
2,100
2,150
2,200
2,250
2,300
2,350
3/15 3/29 4/12 4/26 5/10 5/24 6/7
Ind
ex
Shanghai Composite Index-Trailing 90 Days
Source: Bloomberg
265
270
275
280
285
290
295
300
305
310
315
3/15 3/29 4/12 4/26 5/10 5/24 6/7
Ind
ex
Euro Stoxx Index-Trailing 90 Days
Source: Bloomberg
13,800
14,000
14,200
14,400
14,600
14,800
15,000
15,200
15,400
15,600
3/15 3/29 4/12 4/26 5/10 5/24 6/7
Ind
ex
Dow Jones Industrial Average -Trailing 90 Days
Source: Bloomberg
Last Change % Chg. YTD % Last Change % Chg. YTD %
S&P 500 1,627.27 -7.02 -0.43% 14.74% Swiss Market Index 7,635.96 -140.86 -1.81% 12.04%
Dow Industrials 15,070.18 -72.04 -0.47% 15.81% CAC 40 Index (France) 3,805.16 -55.17 -1.42% 4.84%
Nasdaq Composite 3,423.56 -23.85 -0.69% 14.10% DAX Index (Germany) 8,127.96 -106.48 -1.29% 7.04%
Russell Global 1,498.57 -6.97 -0.46% 7.5% Irish Overall Index 3,915.54 -90.12 -2.26% 14.57%
Russell Global EM 2,909.65 -108.93 -3.61% -8.5% Nikkei 225 12,686.52 -191.01 -1.48% 22.04%
S&P/TSX (Canada) 12,191.28 -96.17 -0.78% -1.26% Hang Seng Index 20,969.14 -869.29 -3.98% -7.45%
Mexico IPC 39,269.30 -751.21 -1.87% -9.67% Shanghai Composite 2,162.04 -110.38 -4.86% -4.72%
Brazil Bovespa 49,444.70 -1157.31 -2.24% -17.21% Kospi Index (S. Korea) 1,889.24 -34.61 -1.80% -5.40%
Euro Stoxx 600 291.13 -3.83 -1.30% 4.25% Taiwan Taiex Index 7,937.74 -157.46 -1.95% 3.09%
FTSE 100 6,308.26 -97.68 -1.52% 7.06% Tel Aviv 25 Index 1,222.13 -3.13 -0.26% 3.08%
IBEX 35 (Spain) 8,070.90 -159.30 -1.93% -0.74% MICEX Index (Russia) 1,300.80 -41.03 -3.05% -11.65%Source: Bloomberg
WORLD MARKET PERFORMANCE
June 14, 2013
EWM Weekly Market Review
EQUITIES – EMERGING AND FRONTIER MARKETS
7
Last Change % Chg. YTD % Last Change % Chg. YTD %
Mexico IPC 39,269.30 -751.21 -1.9% -9.7% Hang Seng Index 20,969.14 -869.29 -4.0% -7.4%
Brazil (Bovespa Index) 49,474.98 -1157.31 -2.2% -17.2% India (Sensex 30) 19,177.93 -251.30 -1.3% -1.3%
MICEX Index (Russia) 1,300.80 -41.03 -3.1% -11.7% Malaysia (KLCI Index) 1,762.19 -13.40 -0.8% 4.3%
Czech Republic (Prague) 927.42 -34.11 -3.6% -11.1% Singapore (Straits Times Index) 3,161.43 -23.29 -0.7% -0.2%
Turkey (Istanbul) 80,011.13 966.34 1.2% 1.4% Thailand (SET Index) 1,465.27 -50.97 -3.4% 5.3%
Egypt (Hermes Index) 471.27 -45.37 -8.8% -14.5% Indonesia (Jakarta) 4,760.75 -104.58 -2.1% 10.3%
Kenya (Nairobi 20 Index) 4,806.52 -124.65 -2.5% 17.1% Pakistan (Karachi KSE 100) 22,541.64 182.68 0.8% 33.3%
Saudi Arabia (TASI Index) 7,623.89 10.53 0.1% 12.1% Vietnam (Ho Chi Minh) 509.03 -18.94 -3.6% 23.0%
Lebanon (Beirut BLOM Index) 1,150.28 -31.71 -2.7% -1.6% Sri Lanka (Colombo) 6,219.39 -88.04 -1.4% 10.2%
Palestine 454.78 -0.71 -0.2% -4.8% Cambodia (Laos) 1,338.82 0.00 0.0% 10.2%Source: Bloomberg
EMERGING AND FRONTIER MARKET PERFORMANCE
48,000
49,000
50,000
51,000
52,000
53,000
54,000
55,000
56,000
57,000
58,000
3/15 3/29 4/12 4/26 5/10 5/24 6/7
Ind
ex
Brazil (Bovespa Index)-Trailing 90 Days
Source: Bloomberg
17,000
17,500
18,000
18,500
19,000
19,500
20,000
20,500
3/15 3/29 4/12 4/26 5/10 5/24 6/7
Ind
ex
India (Sensex Index)-Trailing 90 Days
Source: Bloomberg
400
420
440
460
480
500
520
540
560
580
3/17 3/31 4/14 4/28 5/12 5/26 6/9
Ind
ex
Egypt (Hermes Index)-Trailing 90 Days
Source: Bloomberg
2,900
3,000
3,100
3,200
3,300
3,400
3,500
3/15 3/29 4/12 4/26 5/10 5/24 6/7
Ind
ex
Singapore (Straits Times Index)-Trailing 90 Days
Source: Bloomberg
June 14, 2013
EWM Weekly Market Review
INTEREST RATES
YIELD CURVES
8
Last Change % Chg. YTD % Last Change % Chg. YTD %
2-Yr. U.S. Treasury 0.28% 1 bps NM NM Prime Rate 3.25% 0.00 NM NM
5-Yr. U.S. Treasury 1.02% -6 bps NM NM Fed Funds Rate 0.25% 0.00 NM NM
10-Yr. U.S. Treasury 2.13% -3 bps NM NM Discount Rate 0.75% 0.00 NM NM
30-Yr. U.S. Treasury 3.30% -1 bps NM NM LIBOR (3 Mo.) 0.27% 0 bps NM NM
German 10-Yr. Govt. 1.52% 2 bps NM NM Bond Buyer 40 Muni 4.89% 33 bps NM NM
France 10-Yr. 2.11% 2 bps NM NM Bond Buyer 40 G.O. 4.16% NA NM NM
Italy 10-Yr. 4.26% -6 bps NM NM Bond Buyer 40 Rev. 4.62% NA NM NM
Fed 5-Yr Fwd BE Inf. 2.46% -11 bps NM NM
Source: Bloomberg
SELECTED INTEREST RATES
1M 1Y 3Y 5Y 8Y 10Y 15Y 20Y 30Y0.00
1.00
2.00
3.00
4.00
5.00
6.00
US Treasury Actives Curve 20130607
US Treasury Actives Curve 20130614
USD US Industrial (B) BFV Curv 20130614
USD Composite (BBB) BFV Curve 20130614
1.40
1.50
1.60
1.70
1.80
1.90
2.00
2.10
2.20
2.30
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
10-Year Treasury Yield - Trailing 180 Days
Source: Bloomberg
1.50
1.55
1.60
1.65
1.70
1.75
1.80
1.85
1.90
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
BBB/Baa- 10-Yr Treas. Spread Rising Line = Risk Aversion
Source: Bloomberg
Source: Bloomberg
June 14, 2013
EWM Weekly Market Review
CURRENCIES
9
76
77
78
79
80
81
82
83
84
85
12/17 1/17 2/17 3/17 4/17 5/17
U.S. Dollar Index - Trailing Six Months
Source: Bloomberg
1.22
1.24
1.26
1.28
1.30
1.32
1.34
1.36
1.38
12/17 1/17 2/17 3/17 4/17 5/17
Euro - U.S. Dollars per Euro
Source: Bloomberg
75.00
80.00
85.00
90.00
95.00
100.00
105.00
12/17 1/17 2/17 3/17 4/17 5/17
Japanese yen - Yen per U.S. Dollar
Source: Bloomberg
Last Change % Chg. YTD % Last Change % Chg. YTD %
Dollar Index 80.64 -1.024 -1.25% 1.10% Chinese Yuan 6.13 -0.002 0.04% 1.63%
Euro 1.33 0.013 0.98% 1.17% Swiss Franc 0.92 -0.015 1.60% -0.64%
Japanese Yen 94.33 -3.190 3.38% -8.07% New Zealand Dollar 0.81 0.017 2.13% -2.75%
British Pound 1.57 0.015 0.96% -3.37% Brazilian Real 2.15 0.015 -0.68% -4.43%
Canadian Dollar 1.02 -0.003 0.26% -2.46% Mexican Peso 12.70 -0.069 0.55% 1.24%
SELECTED CURRENCY PERFORMANCE
Source: Bloomberg
6.04
6.06
6.08
6.10
6.12
6.14
6.16
6.18
6.20
6.22
6.24
6.26
12/17 1/17 2/17 3/17 4/17 5/17
Chinese yuan - yuan per U.S. Dollar
Source: Bloomberg
June 14, 2013
EWM Weekly Market Review
COMMODITIES
10
75
80
85
90
95
100
105
12/17 1/17 2/17 3/17 4/17 5/17
$ p
er b
arre
l
Crude Oil - Light Crude ($ per barrel)
Source: Bloomberg
1,200
1,300
1,400
1,500
1,600
1,700
1,800
12/17 1/17 2/17 3/17 4/17 5/17
$ p
er o
un
ce
Gold - Spot gold price ($ per ounce)
Source: Bloomberg
6,000
6,500
7,000
7,500
8,000
8,500
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
Copper
Source: Bloomberg
500
520
540
560
580
600
620
640
12/17 1/17 2/17 3/17 4/17 5/17
$ p
er b
ush
el
Corn - Active Contract
Source: Bloomberg
Last Change % Chg. YTD % Last Change % Chg. YTD %
DJ UBS Comm. Idx. 130.37 -0.83 -0.63% -6.18% Platinum Spot $1,446.55 -$53.65 -3.57% -5.95%
Rogers Int. Comm. Idx. 3543.51 -22.04 -0.62% -4.03% Corn 533.00 -27.25 -4.88% -11.42%
Crude Oil $97.80 $1.93 2.01% 4.55% Wheat 680.75 -17.25 -2.48% -14.46%
Natural Gas $3.74 -$0.07 -1.72% 5.61% Soybeans 1,298.25 -33.50 -2.52% -0.46%
Gasoline ($/Gal.) $3.63 -$0.01 -0.22% 10.12% Sugar 17.09 0.03 0.18% -16.25%
Heating Oil 296.15 8.72 3.01% -0.71% Orange Juice 147.00 -6.35 -4.19% 19.58%
Gold Spot $1,390.91 $5.43 0.39% -17.13% Aluminum 1,857.00 -83.00 -4.28% -10.42%
Silver Spot $22.07 $0.37 1.71% -27.37% Copper 7,050.00 -180.00 -2.49% -11.11%
Source: Bloomberg
SELECTED COMMODITY MARKET PERFORMANCE
June 14, 2013
EWM Weekly Market Review
ALTERNATIVE INVESTMENTS
11
1,160
1,165
1,170
1,175
1,180
1,185
1,190
1,195
1,200
1,205
1,210
1,215
3/18 4/1 4/15 4/29 5/13 5/27 6/10
Ind
ex
HFRX Global Hedge Fund Index - Trailing 90 Days
Source: Bloomberg
930
932
934
936
938
940
942
944
946
948
950
3/18 4/1 4/15 4/29 5/13 5/27 6/10
Ind
ex
HFRX Equity Market Neutral - Trailing 90 Days
Source: Bloomberg
1,245
1,250
1,255
1,260
1,265
1,270
1,275
1,280
1,285
1,290
1,295
3/18 4/1 4/15 4/29 5/13 5/27 6/10
Ind
ex
IQ Fixed Income Beta Arb Index - Trailing 90 Days
Source: Bloomberg
1,060
1,070
1,080
1,090
1,100
1,110
1,120
1,130
1,140
3/18 4/1 4/15 4/29 5/13 5/27 6/10
Ind
ex
HFRX Equity Hedge Index - Trailing 90 Days
Source: Bloomberg
Last Change % Chg. YTD % Last Change % Chg. YTD %
HFRX Global Hedge Fund Index 1194.00 -6.57 -0.55% 3.40% HFRX Distressed Index 981.69 -1.46 -0.15% 3.06%
HFRX Equity Market Neutral 944.09 -4.14 -0.44% 0.90% HFRX Merger Arbitrage Index 1537.29 -0.22 -0.01% 1.95%
HFRX Equity Hedge Index 1096.69 -11.83 -1.07% 4.59% HFRX Convertible Arbitrage Index 765.52 7.86 1.04% 8.66%
HFRX Event-Driven Index 1488.89 -2.56 -0.17% 7.49% HFRX Macro CTA Index 1141.82 -6.54 -0.57% -1.09%
HFRX Absolute Return Index 972.78 -1.76 -0.18% 1.74% IQ Fixed Income Beta Arb Index 1268.65 0.00 0.00% 2.44%
Source: Bloomberg
SELECTED ALTERNATIVE INVESTMENT INDEX PERFORMANCE
June 14, 2013
EWM Weekly Market Review
0.325
0.330
0.335
0.340
0.345
0.350
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
High Yield/Inv. Grade Bonds - Trailing 180 Days
Source: Bloomberg
2.35
2.40
2.45
2.50
2.55
2.60
2.65
2.70
2.75
2.80
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
S&P 500/MSCI EAFE - Trailing 180 Days
Source: Bloomberg
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
1.55
12/17 1/17 2/17 3/17 4/17 5/17In
dex
MSCI EAFE/MSCI EM - Trailing 180 Days
Source: Bloomberg
2.50
2.70
2.90
3.10
3.30
3.50
3.70
3.90
4.10
4.30
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
S&P 500/MSCI EM - Trailing 180 Days
Source: Bloomberg
0.36
0.37
0.37
0.38
0.38
0.39
0.39
0.40
0.40
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
Large Cap/Small Cap - Trailing 180 Days
Source: Bloomberg
0.54
0.54
0.55
0.55
0.56
0.56
0.57
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
Growth/Value - Trailing 180 Days
Source: Bloomberg
0.180
0.185
0.190
0.195
0.200
0.205
0.210
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
Info Tech/S&P 500 - Trailing 180 Days
Source: Bloomberg
1.76
1.77
1.78
1.79
1.80
1.81
1.82
1.83
1.84
1.85
1.86
1.87
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
Inv. Grade Bonds/Int. Govt. Bonds - Trailing 180 Days
Source: Bloomberg
0.61
0.61
0.62
0.62
0.63
0.63
0.64
0.64
0.65
12/17 1/17 2/17 3/17 4/17 5/17
Ind
ex
High Yield Bonds/Int. Govt. Bonds - Trailing 180 Days
Source: Bloomberg
12
PORTFOLIO CONSTRUCTION
June 14, 2013
EWM Weekly Market Review
13
The Relative Strength Matrix provides an indication of how the various asset classes have performed relative to one another over the past 30 days. A number greater than 1.0 indicates that the asset class in the far left column has outperformed the corresponding asset class in the top row over the past 30 days. A number below 1.0 means the asset class on the left has underperformed the asset class at the top. The green shading indicates outperformance, and the red shading indicates underperformance.
Source: Bloomberg
4/11 4/18 4/25 5/2 5/9 5/16 5/23 5/30 6/6 6/13
Large Cap
(R200)2.02% -3.15% 2.63% 0.87% 1.65% 1.39% 0.07% 0.31% -1.84% 0.81%
Small Cap
(R2000)2.31% -4.81% 4.30% -0.05% 2.81% 1.97% -0.11% 1.03% -1.51% 1.04%
MSCI EAFE 3.91% -3.27% 3.65% 0.51% 1.72% 0.31% -2.17% -0.64% -3.11% 0.42%
MSCI Em.
Mkts.1.20% -3.10% 3.01% 0.98% 2.24% -1.34% -1.95% -0.96% -3.05% -4.21%
BarCap Agg.
(AGG)-0.04% 0.35% 0.03% 0.13% -0.63% -0.11% -0.63% -0.51% -0.34% -0.18%
High Yield
(JNK)0.81% -0.27% 1.07% 0.48% 0.24% -0.74% -0.34% -0.68% -2.00% 0.15%
DJ UBS Index 1.03% -2.53% 0.77% -0.77% 1.36% -1.86% 1.27% -0.94% 0.33% -1.27%
Hedge Funds
(HFRX Global)0.59% -0.52% 0.74% 0.29% 0.77% 0.38% -0.37% 0.08% -1.00% -0.28%
60/40* 1.51% -1.96% 1.98% 0.45% 0.94% 0.52% -0.65% -0.16% -1.54% 0.14%
48/32/20
(w/Alts.)**1.33% -1.67% 1.73% 0.42% 0.90% 0.49% -0.60% -0.11% -1.43% 0.06%
Source: Bloomberg; *60/40 portfolio = 30% Large Cap/10% Small Cap/15% EAFE/5% Emerging Markets/35% BarCap Agg./5% High Yield.
**48/32/20 portfolio = 24% Large Cap/8% Small Cap/12% EAFE/4% Emerging Markets/28% BarCap Agg./4% High Yield/20% HFRX Global Index.
WEEKLY ASSET CLASS PERFORMANCE (Prior 10 weeks ending Thursday)
Alternatives
Asset Allocation
Domestic
Equity
Int'l.
Equity
Fixed Income
Commodities
Equity
Large Cap
Core
Large Cap
Growth
Large Cap
Value
Mid Cap
Core
Mid Cap
Growth
Mid Cap
Value
Small Cap
Core
Small Cap
Growth
Small Cap
Value
Int'l.
Developed
Emerging
Markets REITs Comm. Int. Bond High Yield
Large Cap Core 1.00 1.04 0.97 1.03 1.02 1.04 0.98 0.96 1.01 1.24 1.93 1.28 1.32 1.47 1.35
Large Cap Growth 0.96 1.00 0.94 0.99 0.98 1.00 0.95 0.92 0.97 1.20 1.87 1.23 1.27 1.42 1.30
Large Cap Value 1.03 1.07 1.00 1.06 1.05 1.07 1.01 0.99 1.04 1.28 1.99 1.32 1.36 1.52 1.39
Mid Cap Core 0.97 1.01 0.94 1.00 0.99 1.01 0.96 0.93 0.98 1.21 1.88 1.24 1.28 1.43 1.31
Mid Cap Growth 0.98 1.02 0.95 1.01 1.00 1.02 0.96 0.94 0.99 1.22 1.90 1.25 1.29 1.45 1.32
Mid Cap Value 0.97 1.00 0.94 0.99 0.98 1.00 0.95 0.92 0.97 1.20 1.87 1.23 1.27 1.42 1.30
Small Cap Core 1.02 1.06 0.99 1.05 1.04 1.06 1.00 0.98 1.03 1.26 1.97 1.30 1.34 1.50 1.37
Small Cap Growth 1.04 1.08 1.01 1.07 1.06 1.08 1.03 1.00 1.05 1.30 2.02 1.33 1.37 1.54 1.41
Small Cap Value 0.99 1.03 0.96 1.02 1.01 1.03 0.98 0.95 1.00 1.23 1.92 1.27 1.31 1.46 1.34
Int'l. Developed 0.81 0.84 0.78 0.83 0.82 0.84 0.79 0.77 0.81 1.00 1.56 1.03 1.06 1.19 1.09
Emerging Markets 0.52 0.54 0.50 0.53 0.53 0.54 0.51 0.50 0.52 0.64 1.00 0.66 0.68 0.76 0.70
REITs 0.78 0.81 0.76 0.81 0.80 0.81 0.77 0.75 0.79 0.97 1.52 1.00 1.03 1.15 1.06
Commodities 0.76 0.79 0.74 0.78 0.77 0.79 0.75 0.73 0.77 0.94 1.47 0.97 1.00 1.12 1.02
Int. Bond 0.68 0.70 0.66 0.70 0.69 0.70 0.67 0.65 0.68 0.84 1.31 0.87 0.89 1.00 0.92
High Yield 0.74 0.77 0.72 0.76 0.76 0.77 0.73 0.71 0.75 0.92 1.43 0.95 0.98 1.09 1.00
RELATIVE STRENGTH MATRIX (BASED ON 30-DAY RSI)
June 14, 2013
EWM Weekly Market Review
14FOR FINANCIAL ADVISOR USE ONLY. NOT FOR DISTRIBUTION TO THE PUBLIC.
INDEX OVERVIEW The S&P 500 Index is an unmanaged index comprised of 500 widely held securities considered to be representative of the stock market in general. The S&P/Case-Shiller Home Price Indices measure the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. The MSCI EAFE Index represents 21 developed markets outside of North America. The MSCI EAFE Growth Index is an unmanaged index considered representative of growth stocks of Europe, Australasia and the Far East. The MSCI EAFE Value Index is an unmanaged index considered representative of value stocks of Europe, Australasia and the Far East. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The MSCI Europe Index is an unmanaged index considered representative of stocks of developed European countries. The Barclays US Credit Index is an unmanaged index considered representative of publicly issued, SEC-registered US corporate and specified foreign debentures and secured notes. The Barclays US Aggregate Bond Index is a market capitalization-weighted index of investment-grade, fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Barclays US Corporate High Yield Index covers the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. The index may include emerging market debt. The Barclays Capital Municipal Bond Index is an unmanaged index comprised of investment-grade, fixed-rate municipal securities representative of the tax-exempt bond market in general. The Barclays US Treasury Total Return Index is an unmanaged index of public obligations of the US Treasury with a remaining maturity of one year or more. The Citigroup World Government Bond Index is a market capitalization weighted bond index consisting of the government bond markets of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Malaysia, Mexico, the Netherlands, Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The DJ-UBS Commodity Index Total ReturnSM measures the collateralized returns from a basket of 19 commodity futures contracts representing the energy, precious metals, industrial metals, grains, softs and livestock sectors. The Russell 1000 Index is a market capitalization-weighted benchmark index made up of the 1000 largest U.S. companies in the Russell 3000 Index. The Russell 1000 Growth Index is an unmanaged index considered representative of large-cap growth stocks. The Russell 1000 Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 2000 Index is an unmanaged index considered representative of small-cap stocks. The Russell 2000 Growth Index is an unmanaged index considered representative of small-cap growth stocks. The Russell 2000 Growth Index is an unmanaged index considered representative of small-cap value stocks. The Russell 3000 Index is an unmanaged index considered representative of the US stock market. The Russell Midcap Index is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap Growth Index is an unmanaged index considered representative of mid-cap growth stocks. The Russell Midcap Value Index is an unmanaged index considered representative of mid-cap value stocks. The HFRX Indices are a series of benchmarks of hedge fund industry performance which are engineered to achieve representative performance of a larger universe of hedge fund strategies. Hedge Fund Research, Inc. employs the HFRX Methodology (UCITS compliant), a proprietary and highly quantitative process by which hedge funds are selected as constituents for the HFRX Indices. The Consumer Price Index (CPI) measures the change in the cost of a fixed basket of products and services. The Gross Domestic Product (GDP) rate is a measurement of the output of goods and services produced by labor and property located in the United States. The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this weekly review is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. An investor may experience loss of principal. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment strategy. Past performance is not indicative of future results. Information obtained from third party sources are believed to be reliable but not guaranteed. Endowment Wealth Management makes no representation regarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Investments in smaller companies carry greater risk than is customarily associated with larger companies for various reasons such as volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. Investing overseas involves special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. Income (bond) securities are subject to interest rate risk, which is the risk that debt securities in a portfolio will decline in value because of increases in market interest rates. Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing in ETFs may bear indirect fees and expenses charged by ETFs in addition to its direct fees and expenses, as well as indirectly bearing the principal risks of those ETFs. ETFs may trade at a discount to their net asset value and are subject to the market fluctuations of their underlying investments. Investing in commodities can be volatile and can suffer from periods of prolonged decline in value and may not be suitable for all investors. Index Performance is presented for illustrative purposes only and does not represent the performance of any specific investment product or portfolio. An investment cannot be made directly into an index.
June 14, 2013
EWM Weekly Market Review
15
Alternative Investments may have complex terms and features that are not easily understood and are not suitable for all investors. You should conduct your own due diligence to ensure you understand the features of the product before investing. Alternative investment strategies may employ a variety of hedging techniques and non-traditional instruments such as inverse and leveraged products. Certain hedging techniques include matched combinations that neutralize or offset individual risks such as merger arbitrage, long/short equity, convertible bond arbitrage and fixed-income arbitrage. Leveraged products are those that employ financial derivatives and debt to try to achieve a multiple (for example two or three times) of the return or inverse return of a stated index or benchmark over the course of a single day. Inverse products utilize short selling, derivatives trading, and other leveraged investment techniques, such as futures trading to achieve their objectives, mainly to track the inverse of their benchmarks. As with all investments, there is no assurance that any investment strategies will achieve their objectives or protect against losses. Neither Endowment Wealth Management nor its representatives render tax, accounting or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Taxpayers should always seek advice based on their own particular circumstances from an independent tax advisor. Copyright Endowment Wealth Management, Inc. All rights reserved
ABOUT Endowment Wealth Management, Inc. We are a Multi-Client Family Office whose sole mission is to provide wealth sustainability for individuals, families, retirement plans and institutions through the utilization of the Endowment Investment Philosophy. We manage our client’s financial wealth to enhance the human capital of their future generations. We work closely with our clients to develop an integrated long-term wealth plan that maximizes the benefit gained by integrating all of our individuals or families wealth producing assets. We are different from many other firms, in the way we build our portfolios on behalf of our clients.
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June 14, 2013