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Aon Hewitt Retirement and Investment Blog

Weekly Update - 13 November 2017

UPCOMING EVENTS

  • Webinar: Retirement Planning for 2018 & Beyond. Our U.S. Retirement experts will share ideas for what plan sponsors should have on their radar to finish strong across U.S. funding, accounting, and compliance requirements in 2017 and how to position effectively for 2018 and beyond! If you are interested in attending this webinar on November 14th, register now. If you cannot attend live, registering will ensure you receive access to the webinar replay you can view at your convenience.
MARKET MOVES - Week Ending November 10, 2017
Equities

  • Global equity markets fell over last week, after gaining for eight consecutive weeks previously. News of Senate Republicans releasing a draft of the tax reform bill, which may delay the corporate tax cut until 2019, unnerved the markets. The MSCI World Index fell by 0.2% over the week, underperforming S&P 500 which fell by 0.1% over the same period. On a year to date basis, MSCI World has outperformed S&P 500 (19.0% vs. 17.3%).
  • US Large Cap stocks outperformed Small Cap stocks as the S&P 500 fell by 0.1% whilst Russell 2000 fell 1.3% over the week. On a year to date basis, S&P 500 has outperformed Russell 2000 (17.3% vs. 9.9%). Growth stocks underperformed Value stocks last week (0.2% vs.  -0.5%) as measured by MSCI USA indices. On a year to date basis, Growth stocks have outperformed Value stocks (24.7% vs. 10.5%).
Bonds
  • Both the 10 year US Treasury yields and the 30 year US Treasury yields rose by 7bps each to 2.40% and 2.88% respectively amid renewed uncertainty over the much awaited US tax reform bill.
  • 20 year TIPS yield rose by 5bps to 0.67% over the week. 20 year Breakeven rose by 2bps to 1.78%.
  • Both the Barclays Capital Long Credit Index spread over treasury yields and Merrill Lynch US Corporate Index rose by 4bps each to 149bps and 106bps respectively.
  • The US high yield bond spread over US treasury yields rose by 24bps to 376bps. The spread of USD denominated EM debt over US treasury yields finished the week 7bps higher at 298bps.
 Commodities          
  • The S&P GSCI rose by 1.2% in USD terms over the week. The energy sector rose by 2.6% as the price of WTI crude oil increased by 2.0% to $57/BBL. Industrial metals fell by 2.1% as copper prices decreased by 1.6% to $6,754/MT. Agricultural prices rose by 0.8% as the gold prices increased by 0.7% to $1,276/ounce.  
Currencies
  • The US dollar depreciated against major currencies over the week. The US dollar depreciated by 1.2% against sterling, ending the week at $1.32/£. US dollar weakened by 0.4% against the euro, finishing the week at $1.17/€. The Japanese yen rose by 0.9% against the US dollar, ending the week at ¥113.29/$.
Economic Releases
  • The US was light in terms of economic data releases over the week. Weekly initial jobless claims came in at 239k, broadly in line with the 232k expected, as the labour market continued to stabilise following hurricane-fuelled disruption experienced in September. The University of Michigan consumer confidence reading for November disappointed at 97.8 versus a forecasted 100.8, as falls were recorded across the current and expected economic conditions sub-components. Weekly MBA mortgage applications were flat, rebounding from the previous week’s 2.6% decline. The final September wholesale trade index was unrevised at 0.3% growth month-on-month. Wholesale sales rose 1.3% month-on-month in September, leaving the inventory-shipments ratio at 1.27, its lowest level since December 2014.
  • In the Eurozone, economic data was positive over the week. Final readings of the October Purchasing Managers' Index (PMI) were revised marginally higher, with the services PMI now at 55.0 and composite PMI at 56.0. Retail sales data for September rebounded, growing 0.7% month-on-month, from the 0.1% decline previously. Annual sales grew 3.7%, ahead of 2.8% expected and increasing from 2.3% previously. The November Sentix investor confidence also beat forecasts at 34, versus 31 expected, now slightly lower than the pre-crisis high. Encouragingly, Germany’s September factory orders were above expectations, growing 1.0% month-on-month against an expected 1.1% decline, and up 9.5% over the year, versus 7.1% expected. Germany’s September trade surplus was also notably above expectations at €24.1bn as both exports, 7.7%, and imports, 7.5%, grew over the year.
  • Japanese economic data was mixed over the week. Core machine orders fell by 8.1% in September after last month's 3.4% increase. The Tertiary Industry Index also slipped by more than expected, falling 0.2% in September. Wage growth data continued to be encouraging as labour cash earnings rose by 0.9% in the year to September, against a forecasted increase of 0.5%. Real wages, which take inflation into consideration, fell by 0.1% over the same period but beat analysts’ forecasts for a 0.2% decline.
  • Chinese inflation data exceeded expectations, with the Chinese consumer price index rising by 1.9% for the year to October, above expectations of 1.8% and the previous month’s rate of 1.6%. Both export and import growth slowed for the year to October and the trade surplus rose to $38.2bn from $28.6bn. Export growth slowed to 6.9% from 8.0% and below forecasts of 7.1%. Import growth decelerated to 17.2%, down from 18.6% but above expectations of 17.0%.
Sources: Global Asset Allocation, Bank of America Merrill Lynch, Barclays Capital, Datastream. Click here for index descriptions.

The information contained above should be regarded as general information only. That is, your personal objectives, needs or financial situation were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of acting on this information, particularly in the context of your own objectives, financial situation and needs. Nothing in this document should be treated as an authoritative statement of the law on any particular issue or specific case. Use of, or reliance upon any information in this post is at your sole discretion. It should not be construed as legal, tax or investment advice. Please consult with your independent professional for any such advice. The information contained within this blog is given as of the date indicated and does not intend to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information since the date of publication, or any obligation to update or provide amendments after the original publication date. The blog content is intended for professional investors only.


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