We’ve moved! Click here to view our most recent content!

Set Regional Preference
Required Field*
Set geographic preferences to highlight topics of greatest interest of you, written in your base currency.
 




 
 










Aon Retirement and Investment Blog

Weekly Update - 12 September 2016

NEW INTELLECTUAL CAPITAL

  • Aon Trustee Checklist.  Making a decision - any decision - is hard. Making the right decision is even harder. But, if we have all the facts, expertise, and experience at our fingertips, we are fine - right? Maybe not. Trustee boards are faced with multiple ideas competing for investment, and once these decisions have been made, multiple tasks competing to be implemented first. So where should you begin? This Trustee Checklist was developed by the UK investment consulting practice to aid in decision-making. 
  • Global Invested Capital Market. The concept of a world market portfolio features prominently in many financial theories and models and serves as an important foundation of our asset allocation work for our clients. This research provides information on each asset’s share of the invested capital markets and is a good starting point for investors considering the appropriate allocation to the asset.  
  • Radar. Provides a summary of recent regulatory and industry events in Canada affecting talent, retirement, and health. A French version is also available.

MARKET MOVES (week ending September 9, 2016)

Equities
  • Global equity markets ended lower as equities fell sharply at the end of the week, reversing gains from earlier on in the week. Investors were disappointed due to inaction by the European Central Bank (ECB) on the monetary stimulus front and hawkish commentary by a US Federal Reserve (Fed) representative. The MSCI World Index fell 1.5% outperforming S&P 500 which fell 2.4% over the week. On a year to date basis, S&P 500 has outperformed MSCI World (5.7% vs. 4.8%).
  • US Small Cap stocks underperformed Large Cap stocks as the Russell 2000 fell 2.6% over the week whereas the S&P 500 fell 2.4%. On a year to date basis, Small Cap stocks have outperformed Large Cap stocks (8.4% vs. 5.7%). Growth stocks underperformed Value stocks last week (-2.7% vs. -2.0%) as measured by MSCI USA indices. On a year to date basis, Value stocks have outperformed Growth stocks, returning (8.3% vs. 3.0%). 
Bonds
  • 10 year US Treasury yield rose by 7bps to 1.67% over the week on the prospect of an interest rate hike as early as September. 30 year US Treasury yield rose by 12bps at 2.39% over the same period.
  • 20 year TIPS yields rose by 6bps to 0.40% over the week.  20 year Breakeven rose by 2bps at 1.40%.
  • Credit spreads were mixed over the week. Both the Barclays Capital Long Credit Index spread over treasury yields and the Merrill Lynch US Corporate Index spread rose by 1bp, thus ending the week at 197bps and 140bps respectively. The US high yield bond spread over US treasury yields ended the week 1bp higher at 510bps. The spread of USD denominated EM debt over US treasury yields finished the week 7bps lower at 330bps.
Commodities
  • The S&P GSCI rose by 1.9% in USD terms over the week. The energy sector rose by 2.8% due to the increase in WTI crude oil prices, which rose sharply by 3.4%, ending the week at USD 46/BBL due to an unexpected record decrease in US crude oil stocks. Industrial metals marginally fell by 0.7% as copper prices were flat at $4,615/MT. Agricultural prices rose 1.6% and the gold price rose 1.2%, finishing the week at $1,334/ounce.
Currencies
  • The US dollar depreciated against major currencies over the week except for the sterling. The US dollar appreciated 0.4% against sterling, ending the week at $1.33/£. US dollar depreciated 0.4% against the euro, finishing the week at $1.12/€. The Japanese yen appreciated by 1.4% against the US dollar on the back of better than expected Japanese economic data, thus ending the week at ¥102.73/$.

ECONOMIC RELEASES

  • In a quiet week for US economic data, what little data were released were disappointing. The non-manufacturing ISM index fell to 51.4, a post crisis low, from 55.5 in August despite expectations that it would remain fairly flat. The IBD/TIPP economic optimism index fell to 46.7 in September, again disappointing the consensus. The labor market conditions index fell by 0.7 in August, offsetting part of July’s 1.3 rise when analysts were expecting no change. Lastly, wholesale trade sales fell by 0.4% over July, once again failing to meet analyst estimates of 0.2% growth.
  • In Europe, the dataflow was a little on the downbeat side. The Markit Eurozone service sector PMI was revised down a touch to 52.8 in August from the initial estimate of 53.1, which meant that there was also a downward revision to the composite index, from 53.3 to 52.9. There was a similar story in Germany, where the service sector PMI was revised down to 51.7 from 53.3 and the composite PMI was revised down to 53.3 from 54.4. German industrial production growth was also weaker than expected, falling by 1.2% in the year to July, compared with the prior month’s growth rate of 0.9% and the consensus estimate of 0.2%. However, there was some good news from the Eurozone retail sales figures, which beat the consensus and grew at an annual rate of 2.9% in July.
  • Japanese labor cash earnings rose at a stronger than expected pace of 1.4% over the year to July, sharply higher than the 0.4% increase penciled in by analysts. Q2 2016 GDP data was revised upwards to 0.7% (QoQ annualized) as business spending fell less than earlier estimates had approximated. The adjusted current account balance fell to ¥1,448bn in July from ¥1,648bn. Meanwhile, the August Economy Watchers survey revealed an optimistic view with the outlook component rising to 47.4, ahead of consensus. The current conditions component rose to 45.6 over the same period. However, the services PMI fell to 49.6 in August from 50.4, entering into contraction territory and dragging the composite PMI down to 49.8 from 50.1.
  • China’s Caixin services PMI rose to 52.1 in August and export growth rose to 5.9% (in CNY terms) for the twelve months to August, ahead of consensus expectations. Similarly, import growth rose, to 10.8% over the same period. This left the trade balance little changed, at 346bn in CNY terms. Lastly, CPI inflation fell sharply to 1.3% over the year to August, a 50 basis point reduction in inflation relative to the previous month.
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.


Share:Add to Twitter Add to Facebook Add to LinkedIn   Print