October 2018
US Economy: Jobs and growth on track.
The US trade deficit widened as global trade weakened and the trade dispute between China and the US escalated. Meanwhile, the labor market remained strong with unemployment falling to 3.7%.
US Stocks: Small-cap stocks stumble.
Small-cap stocks, generally thought to be insulated from trade disputes because of their domestic focus, fell in Sept. as investors grew more cautious on valuations and the potential impact of US import tariffs.
Foreign Stocks: European equities falter.
European stocks rebounded most of September but fell at month-end as Italy’s proposed new budget indicated a deficit whose size contradicts guidelines set by the European Union.
Fixed Income: Round III for the Fed.
The Federal Reserve hiked its target interest rate for the 3rd time in 2018, citing the prospect of at least three more years of US economic growth. The yield on 10-year Treasuries rose to just under 3.1%, up 0.6% so far this year.
Real Assets: Commodities turn positive.
Oil futures (+5.1%) continued to lead commodities markets, while other contracts including corn (+1.6%) and soybeans (+1.4%) rebounded on strong export demand.
Alternatives: A muted September.
Hedge funds continued to lag traditional asset classes in September as the low level of market volatility offered fewer trading opportunities. Managed futures especially struggled to benefit from current market trends.
Equities Total Return
| SEPT | YTD | 1 YR | |
|---|---|---|---|
| U.S. Large Cap | 0.6% | 10.6% | 17.9% |
| U.S. Small Cap | (2.4%) | 11.5% | 15.2% |
| U.S. Growth | 0.3% | 17.0% | 25.9% |
| U.S. Value | (0.0%) | 4.2% | 9.4% |
| Int’l Developed | 0.9% | (1.4%) | 2.7% |
| Emerging Markets | (0.5%) | (7.7%) | (0.8%) |
Fixed Income Total Return
| SEPT | YTD | 1 YR | |
|---|---|---|---|
| Taxable | |||
| U.S. Agg. Bond | (0.6%) | (1.6%) | (1.2%) |
| TIPS | (1.1%) | (0.8%) | 0.4% |
| U.S. High Yield | 0.5% | 2.5% | 2.9% |
| Int’l Developed | (1.4%) | (2.9%) | (1.6%) |
| Emerging Markets | 0.1% | (4.5%) | (2.9%) |
| Tax-Exempt | |||
| Intermediate Munis | (0.5%) | 0.2% | (0.6%) |
| Munis Broad Mkt | (0.7%) | (0.5%) | 0.2% |
Non-Traditional Assets Total Return
| SEPT | YTD | 1 YR | |
|---|---|---|---|
| Commodities | 1.9% | (2.0%) | 2.6% |
| REITs | (2.4%) | 1.8% | 4.3% |
| Hedge Funds | |||
| Absolute Return | (0.4%) | 1.0% | 1.1% |
| Overall HF Market | (0.7%) | (1.2%) | 0.3% |
| Managed Futures | (0.7%) | (3.5%) | 1.7% |
Economic Indicators
| SEPT-18 | MAR-18 | SEPT-17 | |
|---|---|---|---|
| Equity Volatility | 12.1 | 20.0 | 9.5 |
| Implied Inflation | 2.1% | 2.1% | 1.9% |
| Gold Spot $/OZ | $1193 | $1325 | $1280 |
| Oil ($/BBL) | $83 | $70 | $58 |
| U.S. Dollar Index | 90.1 | 86.2 | 87.1 |