The weekly updates for 9/23/2013 includes a listing of the new pieces of intellectual capital that HEK released the prior week, upcoming events, commentary on market experience over the prior week, and a discussion of economic releases during the upcoming week.
NEW PIECES OF INTELLECTUAL CAPITAL RELEASED:
- No Taper For Now. Note summarizing our thoughts on the US Federal Reserve’s surprise decision yesterday not to commence reducing its bond purchases under its quantitative easing program.
- Corporate Pension Liability Hedging Views at 8/31/2013. Updates on views on pricing and efficacy of liability-hedging instruments, including our outlook on interest rates.
- Annuity Pricing Update at 8/31/2013. Monthly update for pricing of annuity purchases.
- Global Pension Risk webinar. October 3rd at 10 am EST. This webinar is primarily geared towards individuals at multinational organizations who have global finance or risk responsibilities. Click here to register. The webinar will highlight key findings from each of the regional Global Pension Risk surveys carried out and will compare and contrast how each region has responded to key issues such as:
o Canada: Solvency and funding position
o EMEA: Interest in making plans more sustainable
o United Kingdom: Managing benefits and liabilities
o United States: Risk transfer solutions
- HEK Conference—“Alternatives Investing: Beyond the Asset Class Silos.” October 3 8:00am-2:45pm in Chicago. This event will highlight new, innovative and forward-thinking approaches on alternative investing for committees and boards looking to take their programs to the next level. It will feature a number of dynamic speakers, a thought-provoking agenda and the chance for Hewitt EnnisKnupp to share our latest high-level thinking and research with our clients and prospects. This event is for retirement plan sponsors, endowments and foundations, and other HEK clients and potential clients. Click here for the conference agenda and here for registration information.
- HEK Monthly Call. October 16 10:00-11:00am Central Time will be our next monthly conference call with clients, when we will discuss market trends and our latest thought leadership. Click here for a more details and registration information.
- Larry Summer’s decision to withdraw from the race to become Federal Reserve Chairman and the Fed’s decision to maintain its buying program supported the equity markets last week. The MSCI World Index outperformed the S&P 500 with a return of 1.9% against 1.3%. Year-to-date, the S&P 500 has outperformed the MSCI World Index (21.8% vs. 19.2%).
- Small cap returns were higher than those for large cap stocks as the Russell 2000 returned 1.8% over the week. Year-to-date, small cap has outperformed large cap with a 27.5% return. Growth stocks outperformed value stocks (1.6% vs. 1.1%) over the week as measured by the MSCI USA indices. Value has outperformed growth year-to-date (22.4% vs. 21.6%).
- 10 and 30 year treasury yields fell by 15 bps to 2.73% and 7 bps to 3.76% respectively. 10 year German yields stayed unchanged at 1.94%.
- 20 year TIPS yields decreased by 19 bps to 1.08% over the week. 20 year breakevens rose by 9 bps to 2.30%.
- The Merrill Lynch US Corporate Index spread and Barclays Capital Long Credit Index spread over treasury yields decreased by 2 bps to 152 bps and by 4 bps to 185 bps respectively. US high yield bond spreads over Treasuries fell by 6 bps to 454 bps while the Emerging Market ($) bond spread over Treasuries declined 27 bps to 326 bps.
- Commodities were down by 1.8% in US dollar terms over the week. The price of Brent crude oil declined 2.9% to $110/BBL as Syria offered to give up its chemical weapons. The Energy sector fell 2.4% as a result. Industrial Metals were up 1.9% with copper price rising by 3.5% to $7,257/MT. Agriculture prices were down 1.4% over the week. Gold gained by 1.6% to end the week at $1,338/ounce.
- The dollar depreciated against the euro and sterling by 1.9% to $1.35/€ and 0.8% to $1.60/£ respectively over the week. The Japanese yen depreciated against the dollar by 0.1% to end the week at ¥99.63/$.
- US industrial production rose by a decent 0.4% month-on-month, just missing expectations of a 0.5% gain. Manufacturing production was strong with a 0.7% gain (0.5% expected), although July’s figure was revised downwards to -0.4% from -0.1%. The EmpireState manufacturing index fell back in September from 8.2 to a four-month low of 6.3. However, September’s US Philadelphia Fed manufacturing index rose to a two-and-a-half-year high of 22.3 from 9.3, greatly exceeding consensus expectations of 10. The new orders indices in both surveys were strong and, together, they paint a generally positive outlook for US manufacturing. Initial jobless claims were again lower than anticipated this week, rising to 309,000 (330,000 expected) up from 294,000 the previous week. The current account deficit narrowed to $98.9bn in the second quarter, which is a 15-year low, helped by lower energy imports. CPI inflation dropped in August to 1.5% year-on-year from 2% in July. August housing starts fell short of expectations, rising 891k compared with 917k expected. This was due to a weak apartment sector, although single family homes rose and permits for future construction hit a five-year high, pointing to some resilience in the housing market in the face of higher mortgage rates. Existing home sales also increased by 1.7% month-on-month in August, the fastest pace since February 2007, turning around expectations of a 2.6% drop.
- The Eurozone ZEW Survey posted a jump in investor and analyst sentiment as the expectations index rose to 58.6 in September from 44.0 and the German equivalent index reached 49.6 from 42.0. Germany’s figure is the highest since April 2010. The boost is likely driven by the news that the region is out of recession. The EU Commission’s consumer confidence indicator also rose in September, hitting -14.9, up from -15.6, but still less than the -14.5 expected.
- Japan’s trade balance improved in August, defying consensus expectations of a fall, on the back of higher than expected exports and lower than expected imports. The All Industry Activity Index grew 0.5% month-on-month in July, up from a -0.6% decrease in June. There was further positive news from department store sales. Year-on-year sales rose by 2.7% in August on a nationwide basis and they were even stronger in Tokyo with a gain of 5.6%.
Source: Hewitt EnnissKnupp