Thursday, June 18, 2015

May June 2015 Market Observations

The US equity markets continue their advance 
• The S&P 500 returned 1.3% for the month. Small cap led the advance. 
• Growth outperformed value in the small and large cap segments. Value outperformed growth in the mid cap segment. 
• Health care and technology were the top performing sectors in the small, mid and large cap segments, supporting the growth indices. The energy sector was the worst performing sector with negative returns, dragging down the value indices. 
• Real assets such as MLPs, REITs and infrastructure were negative performers for the month. 
• Price momentum and Growth factors were the best performing. Quality and value factors were weaker but still positive. 

Weak performance in international and emerging markets for the month 
• International equities, as reflected by the MSCI EAFE Index, finished the month with a return of -0.5% in USD terms, underperforming the US market. Japan outperformed Europe as per the MSCI Japan Index return of 5.0% versus the MSCI Europe Index which returned -0.8% in USD terms. 
• Emerging markets, as reflected by MSCI EM Index, returned -4.0% for the month in USD terms. EM Eastern Europe and Latin America were the worst performing EM regions. 
• The energy sector was the weakest performing in both non-US developed and emerging markets. 
• Price momentum was clearly the top performing factor in developed markets. Quality was the top performing factor in emerging markets. The weakest performing factors were value in both developed and emerging markets. 

High yield credit was lone bright spot in fixed income 
• High yield credit was the best performing fixed income segment for the month. Only high yield, leveraged loans and short duration Treasuries posted positive returns (with the exception of CCC-rated credit, which was slightly down for the month). 
• Long duration Treasuries was the worst performing fixed income segment followed by investment grade credit. 
• Most major currencies depreciated relative to the US dollar during the month. The main exception was the Renminbi. 
• Currency depreciation hurt the performance of non-dollar bonds after a strong month in April.

Market information source: Bloomberg.

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