The weekly updates for 9/30/2013 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.
Effective November 4, HEK’s Chicago office will be moving to:Aon Center 200 E. Randolph St., Suite 1500 Chicago, IL 60601
NEW PIECES OF INTELLECTUAL CAPITAL RELEASED:
- Medium-Term View Update. Includes HEK’s tactical views across asset classes. Please contact us directly through your consultant or email@example.com if you’d like to receive this document.
- 2013 China Pension White Paper. Through this white paper we are excited to share our observations on China’s retirement system and our insights into it.
- 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:
- Canada: Solvency and funding position
- EMEA: Interest in making plans more sustainable
- United Kingdom: Managing benefits and liabilities
- 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.
- Market focus shifted from US monetary policy to US fiscal policy last week as progress stalled over US budget and debt ceiling negotiations and investors grew concerned over the possibility of a US government shutdown. There was also political tension in Europe as Berlusconi threatened to withdraw his party’s support for the Italian coalition government. The MSCI World Index outperformed the S&P 500 with a return of -0.4% against -1.0%. Year-to-date, the S&P 500 has outperformed the MSCI World Index (20.5% vs. 18.7%).
- Small cap returns were higher than those for large cap stocks as the Russell 2000 returned +0.2% over the week. Year-to-date, small cap has outperformed large cap with a 27.7% return. Growth stocks outperformed value stocks (-0.6% vs. -1.2%) over the week as measured by the MSCI USA indices. Year-to-date growth and value stocks are now posting relatively the same return (20.80% and 20.95% respectively).
- Heightened political worries drove demand for safe haven government bonds. 10 and 30 year treasury yields fell by 11 bps to 2.62% and 7 bps to 3.69% respectively. 10 year German yields decreased by 15 bps to 1.79%.
- 20 year TIPS yields decreased by 7 bps to 1.01% over the week. 20 year breakevens fell by 3 bps to 2.27%.
- The Merrill Lynch US Corporate Index spread and Barclays Capital Long Credit Index spread over treasury yields increased by 1 bp to 153 bps and by 3 bps to 188 bps respectively. US high yield bond spreads over Treasuries widened by 21 bps to 475 bps while the Emerging Market ($) bond spread over Treasuries widened 23 bps to 349 bps.
- Commodities were down by 0.4% in US dollar terms over the week. The price of Brent crude oil declined 0.6% to $109/BBL as the US and Russia came closer to a UN resolution to remove Syria’s chemical weapons. The Energy sector fell 1.1% as a result. Industrial Metals were up 0.9% with the copper price rising by 0.4% to $7,286/MT. Agriculture prices were up 2.1% over the week. Gold gained 0.1% to end the week at $1,340/ounce.
- The US dollar came under further pressure as a result of US fiscal uncertainty, depreciated against the euro, yen and sterling by 0.2% to $1.35/€, 1.1% to ¥98.26/$ and 0.8% to $1.61/£ respectively over the week.
- US economic data releases over the last week were rather disappointing. The preliminary Purchasing Managers’ Index (PMI) dipped in September from 53.1 to 52.8 (54.0 expected). This was the second consecutive month of decline. Output growth accelerated to a six-month high of 55.3 from 52.5, but new orders posted the slowest gain since April, indicating that upcoming production may slow. The employment sub-index also fell to a three month low. US durable goods orders rose by just 0.1% month-on-month in August and, excluding the volatile transportation figures, orders fell by 0.1%. The Conference Board’s measure of consumer confidence fell to 79.7 in September from 81.8 (79.9 expected), no doubt hit by higher mortgage rates.
- The Eurozone PMI encouragingly rose to 52.1 in September from 51.5, confirming the region’s economic recovery. The manufacturing index weakened a little while services improved. The same pattern emerged from Germany with manufacturing activity expanding at a slower rate than expected, but the services sector grew strongly. Eurozone Economic Confidence beat forecasts with a 96.9 level in September, up from 95.3.
Source: Hewitt EnnissKnupp