US Economy: Better-than-expected but slowing.
The revised reading on US economic growth in the 3rd quarter showed a 2.1% annualized rate of growth, faster than previously estimated. Consumer spending (+0.3% in October) will likely continue to support the expansion but analyst forecasts for 2020 suggest growth is likely to slow.
US Stocks: New highs on trade hopes.
In November, US equities posted their strongest month since June, on optimism that a substantive trade deal with China is on the horizon and 3rd quarter US corporate earnings continued for the most part to beat analysts’ meager expectations. Given this backdrop, growth stocks jumped back in front of value stocks.
Foreign Stocks: Emerging market doldrums.
Non-US stocks did not get a big boost from trade hopes, with EM stocks languishing. EM returns have been increasingly driven by the performance of China as that country’s representation in EM indexes grows. China’s slowing economy, a strong US dollar, and geopolitical tumult in Latin America have all been headwinds year-to-date.
Fixed Income: Rates inch upward.
US long-term interest rates have drifted slightly higher over the past few months, with the yield on 10-Year US Treasury bonds reaching 1.8%. A modest rise in rates fits with investor expectations for limited inflation and the Federal Reserve indicating it will not make additional interest rate cuts for the foreseeable future.
Real Assets: Commodities lag.
Real assets struggled with the risk-on environment, tame inflation and indications of economic weakness. Safe havens such as gold and silver saw lower demand and falling prices, as did most components of the economically sensitive energy and industrial metals categories.
Alternatives: Hedge funds positive.
Hedge funds continued to post incrementally positive returns benefitting from the extended trend of strong equity markets. Managed futures strategies added value through positions that benefited from interest rates going up.
Equities Total Return
|U.S. Large Cap||3.6%||27.6%||16.1%|
|U.S. Small Cap||4.1%||22.0%||7.5%|
Fixed Income Total Return
|U.S. Agg. Bond||(0.1%)||8.8%||10.8%|
|U.S. High Yield||0.3%||12.1%||9.6%|
|Munis Broad Mkt||0.2%||7.4%||8.7%|
Non-Traditional Assets Total Return
|Overall HF Market||1.1%||7.3%||5.3%|
|Gold Spot $/OZ||$1464||$1306||$1221|
|U.S. Dollar Index||92.7||92.3||91.7|