MONTHLY MARKET REVIEW April 2015 www.primebuchholz.com 603.433.1143 1 April marked a reversal of several key capital market trends, positively impacting non-U.S. investments and real asset allocations. After rallying sharply since July 2014, the U.S. dollar (USD) declined against most developed and emerging markets currencies during April. Many global equity markets also posted strong gains in local terms, led by emerging markets (EM) equity and the currency moves served as a tailwind, augmenting returns. Crude oil prices also rallied sharply amid the falling USD and potential increased demand from China. This aided energy- related equities and several commodity investments, which posted negative absolute returns in the first quarter. Emerging markets equities delivered healthy returns in April against a backdrop of stabilizing commodity prices, a recovery in emerging markets currencies, and the growing likelihood that monetary tightening in the U.S. will be delayed. The MSCI EM Index advanced 7.7% for the month; for the year-to-date (YTD) period, the Index is well ahead of domestic equity and, to a lesser extent, non-U.S. developed equities. A recent trend has been the dispersion of EM country performance, as leadership within the developing world has varied in response to shifts in the market and country-specific drivers of return. After significant losses in the first quarter, both Brazil (16.8%) and Colombia (16.4%) rallied following recovery in their respective currencies and commodity prices. Russia (+17.3% USD, +6.6% local) also continued its recovery from 2014 with the help of rising oil prices, some stabilization of geopolitical risks, and a stronger ruble. A notable positive outlier has been China, which gained 16.7% in April and 26.2% YTD and has been a standout performer since mid-2014. The country has managed a sustained rally despite slowing GDP growth and -10% 0% 10% 20% 30% 40% 50% Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 Equity Cumulative YTD Returns MSCI China Shanghai Composite (LC) MSCI EM MSCI EAFE S&P 500 Market Returns (%) MTD QTD YTD 1 Yr 2 Yr 3 Yr 5 Yr 10 Yr Market Returns (%) MTD QTD YTD 1 Yr 2 Yr 3 Yr 5 Yr 10 Yr S&P 500 1.0 1.0 1.9 13.0 16.6 16.7 14.3 8.3 Barclays TIPS 0.7 0.7 2.2 2.5 -1.8 0.2 4.0 4.4 MSCI EAFE (USD) 4.1 4.1 9.2 1.7 7.3 11.2 7.4 5.6 FTSE EPRA/NAREIT Developed 0.0 0.0 4.1 11.7 3.9 11.0 10.5 7.4 MSCI EME (USD) 7.7 7.7 10.1 7.8 2.9 3.2 3.0 9.6 S&P NA Natural Resources 7.6 7.6 6.0 -11.0 3.7 3.5 4.3 7.7 Barclays Aggregate -0.4 -0.4 1.2 4.5 2.1 2.6 4.1 4.7 Bloomberg Commodity 5.7 5.7 -0.5 -24.7 -11.9 -9.7 -5.0 -2.4 Barclays Long Treasury -3.1 -3.1 0.7 15.3 4.1 5.1 9.3 7.2 Fund Weighted HFRI 0.8 0.8 3.1 5.2 5.4 5.8 4.4 5.5 Barclays Global TSY (Unhedged) 1.1 1.1 -1.2 -5.5 -2.2 -1.8 1.7 3.1 Barclays 1-3 Month T-Bill 0.0 0.0 0.0 0.0 0.0 0.0 0.1 1.4
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MONTHLY MARKET REVIEW
April 2015
www.primebuchholz.com 603.433.1143
1
April marked a reversal of several key capital market trends, positively
impacting non-U.S. investments and real asset allocations. After rallying
sharply since July 2014, the U.S. dollar (USD) declined against most
developed and emerging markets currencies during April. Many global
equity markets also posted strong gains in local terms, led by emerging
markets (EM) equity and the currency moves served as a tailwind,
augmenting returns. Crude oil prices also rallied sharply amid the falling
USD and potential increased demand from China. This aided energy-
related equities and several commodity investments, which posted
negative absolute returns in the first quarter.
Emerging markets equities delivered healthy returns in April against a
backdrop of stabilizing commodity prices, a recovery in emerging markets
currencies, and the growing likelihood that monetary tightening in the
U.S. will be delayed. The MSCI EM Index advanced 7.7% for the month;
for the year-to-date (YTD) period, the Index is well ahead of domestic
equity and, to a lesser extent, non-U.S. developed equities. A recent trend
has been the dispersion of EM country performance, as leadership within
the developing world has varied in response to shifts in the market and
country-specific drivers of return. After significant losses in the first
quarter, both Brazil (16.8%) and Colombia (16.4%) rallied following
recovery in their respective currencies and commodity prices. Russia
(+17.3% USD, +6.6% local) also continued its recovery from 2014 with
the help of rising oil prices, some stabilization of geopolitical risks, and a
stronger ruble.
A notable positive outlier has been China, which gained 16.7% in April
and 26.2% YTD and has been a standout performer since mid-2014. The
country has managed a sustained rally despite slowing GDP growth and
-10%
0%
10%
20%
30%
40%
50%
Dec-14 Jan-15 Feb-15 Mar-15 Apr-15
Equity Cumulative YTD Returns
MSCI China
Shanghai Composite (LC)
MSCI EM
MSCI EAFE
S&P 500
Market Returns (%) MTD QTD YTD 1 Yr 2 Yr 3 Yr 5 Yr 10 Yr Market Returns (%) MTD QTD YTD 1 Yr 2 Yr 3 Yr 5 Yr 10 Yr
production neared or reached its short- to medium-term peak.
Meanwhile, global demand benefited from increased crude purchases
from some countries in Europe and China. China is the second largest
consumer of crude and has been building its reserves thus far in 2015.
Further, news of China’s plans to introduce new economic stimulus
supported a stronger demand outlook as the measures are believed to
potentially further boost crude oil demand in the country.
After plunging 13.9% in the final quarter of 2014 and an additional 1.5%
in the first quarter of 2015, the energy-dominated S&P North American
Natural Resource Index advanced 7.6% in April. This pushed YTD
returns into positive territory (+6.0%). During the month, the more
commodity-sensitive equipment and services (+13.4%) and exploration
and production (+11.5%) sectors outperformed large diversified
integrateds (+4.4%). More stable and increasing oil prices drove
improved market sentiment around small and mid cap exploration and
production and equipment and service companies. In addition, returns in
these sub-sectors also appeared to benefit from the view that historically
low valuations provided an attractive entry point. To date, the balance
sheets and liquidity profiles of some companies in these spaces have been
supported by the commodity price hedges put in place prior to the sharp
decline in prices. They have also been aided by surprisingly open access
to new debt and equity capital in the public markets. Elsewhere in natural
resource equities, diversified metals and mining stocks grew 7.7% on both
the weakening dollar and industrial metal commodity price increases
(+7.8%). The sub-sector also advanced on expectations that planned
power production reforms in China would boost demand for copper,
lead, and other industrial metals in the next couple of years.
Indices referenced are unmanaged and cannot be invested in directly. Index returns do not reflect any investment management fees or transaction expenses.
Past performance is not an indication of future results.
This report is intended for informational purposes only; it does not constitute an offer, nor does it invite anyone to make an offer to buy or sell securities. Information herein has been obtained from third-party sources that are believed to be reliable; however, the accuracy of the data is not guaranteed and may not have been independently verified.
The content of this report is current as of the date indicated and is subject to change without notice. It does not take into account the specific investment objectives, financial situations, or needs of individual or institutional investors. All commentary contained within is the opinion of Prime Buchholz and intended solely for our clients.
Unless otherwise noted, Bloomberg was the source for data used in this report.
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