Dec 19, 2016 | edocr |
Past performance is not indicative of future results. Please see Important Disclosures for additional information. O ctober 2016 Contents 1. Highlights 2. Tactical Allocation 3. Global Economic Outlook 4. Global Equity 5. Global Fixed Income 6. Non-Traditional Strategy Performance Summary Publication Details Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 2 Highlights Markets have proved fiercely resilient in the first nine months of the year, despite various storm clouds seemingly swirling by the day. As we enter the final quarter, the US election will be front and center, as will the direction of global central bank policy; this will exacerbate market swings and we expect to see at least one market hiccup before year end. However, global recession risk appears low and the typical harbingers of the end of a bull market are largely absent. Global yields are recovering post-Brexit but we expect them to remain Lower for Longer. Economy The usual summer doldrums did little to improve the prospects of global economic growth, which remain underwhelming and below potential. While we maintain that a global recession does not appear to be in the cards, the lack of obvious growth catalysts persists globally. Moreover, the complexities of politics and global central bank policy are at a crossroads. Equity Despite the ongoing carousel of concerns, global equity markets have continued to move higher. As we enter the final quarter of the year, central bank policy action, US elections, and Italy’s referendum will come into focus. These events will likely lead to increased price fluctuations and at least one market setback. Still, the underlying market trends remain positive, global recession risks remain low, and the fourth quarter historically has tended to be one of the strongest periods of the year. Thus, the bull market, albeit aged and less powerful, remains intact. Fixed Income Central bank policies remain front and center in driving rates but with limits to, and shrinking effectiveness of monetary policy, a shift to fiscal stimulus appears on the horizon. We advise positioning bond allocations at the low end of investment guideline ranges and focus on high quality, including government bonds, mortgage-backed securities, and investment- grade corporate and municipal bonds. We remain cautious on the non- investment grade portion of the credit markets and continue to avoid non-US fixed income. Non-Traditional Our favored strategies are diversified hedge funds, market neutral hedged equity and managed futures in an environment where we believe the future upside in stocks and bonds has moderated. Therefore, we emphasize strategies less dependent on the direction of traditional markets. Third Quarter Recap US economic trends remained sluggish and on an uneven path. The Federal Reserve stayed put at its September meeting, though made clear a rate increase was likely before year end. Several other central banks cut rates in September, including Russia, Turkey and Indonesia. The Bank of Japan decided to change tact, choosing to control the yield curve rather than targeting asset purchases. Meanwhile, the Bank of England and the European Central Bank signaled their willingness to do more to support markets. Despite some bumps, stocks closed out a strong third quarter with a quiet September. Emerging markets remained on top during September, surging for the quarter and extending the year-to-date lead. Non-US developed stocks also had a solid quarter, as core European stocks helped drive performance. Flattish returns put the US behind for September and the quarter, but in the middle of the pack for the year. The trend of the past few months— underperformance by the quality bond sectors—continued in the third quarter. US core bonds were flat for the month and rose modestly for the third quarter, but maintain solid gains for 2016. Longer-dated bonds across the quality spectrum outperformed during the quarter as the yield curve continued to flatten. Commodities rose during September, but fell for the third quarter, though are still holding onto solid year-to-date returns. Past performance is not indicative of future results. Please see Important Disclosures for additional information. Tactical Allocation = No allocation = Current allocation = Opportunistic allocation US Large Cap US Small & Mid Cap Non-US Developed Markets Emerging Markets (EM) Non-US Dev. Markets Small Cap Real Estate Securities Natural Resources Master Limited Partnerships US Government US Mortgage-Backed Securities US Investment Grade Corporate Municipal US High Yield US Leveraged Loans US Preferred Securities US Convertible Non-US Developed Markets Emerging Markets Alternative Strategies Real Assets Fixed income Non-traditional Balanced Portfolio relative to policy benchmark 50% MSCI All Country World Index / 50% Barclays US Aggregate Bond Index or Barclays 1-15 Year Municipal Index O verw eight Significant overw eight O pportunistic allocation Portfolio risk Equity N o allocation Significant underw eight U nderw eight Slight underw eight N eutral Slight overw eight Neutral = within 10% of benchmark allocation Slight Over/Underweight = less than 20% deviation from benchmark Over/Underweight = between 20% and 50% deviation from benchmark Significantly Over/Underweight = 50% and over deviation from benchmark Opportunistic allocations are out-of-benchmark and are made within a range of 0-20 Portfolio Positioning Neutral risk posture given balance of factors: stable US economy, global monetary stimulus and limited attractive alternatives vs. mature cycle, downside global economic risks and richer equity valuations. Equity We continue to advocate a US equity bias within a global equity framework, advise maintaining some exposure to non-US markets as valuations suggest a great deal of bad news is already priced in and recently removed our tactical Emerging Markets underweight. Fixed income Low interest rates remain a headwind for bond returns, but high-quality bonds play an important role as a portfolio stabilizer and tend to outperform during periods of market turmoil. Non-traditional We expect alternative strategies to help balance equity risk and provide a source of differentiated return, especially as stock market opportunities moderate and bond yields remain low. We continue to avoid commodities. Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 4 Figure 1: US Second-Quarter GDP, Contributions to Percent Change Data Source: Bureau of Economic Analysis -0.30 0.18 -1.16 -0.31 0.12 2.88 1.4 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 Total GDP Consumer Spending Business Spending Residential Building Business Inventories Net Exports Government Global Economic Outlook The usual summer doldrums did little to improve the prospects of global economic growth, which remain underwhelming and below potential. In fact, some data wobbled enough in the early summer months to spark some recession chatter that quickly dissipated in subsequent months. While we maintain that a global recession does not appear to be in the cards, the lack of obvious growth catalysts persists globally. Moreover, the complexities of politics and global central bank policy remain at a crossroads. US Economic Growth Remains Sluggish and on an Uneven Path Growth remains sluggish and on an uneven path. Second-quarter gross domestic product (GDP) grew at a 1.4% annualized pace (Figure 1), revised up from the prior release of 1.1%. The biggest moves compared to the prior release were business spending, business inventories, and net exports. Business inventories have contracted for five consecutive quarters, the longest streak since 1956. Among the bright spots, consumer spending remained on a roughly 3% growth trend. However, government flipped back to negative after five consecutive quarters of growth. Much of the weakness was concentrated on the state & local levels. Looking ahead, while we anticipate that GDP will accelerate somewhat, it now appears that the second half will not deliver the growth we and many others originally expected. Thus, as in the three previous years, 2016 will probably fall short, yet it will be enviably better than for most of our developed peers. Meanwhile, the employment situation has improved some since the sluggish summer months. From July through September, monthly job gains have averaged 192,000 (Figure 2). Still, payrolls gained a monthly average of 178,000 this year, following an average 229,000 per month in 2015. Interestingly, average hourly earnings have risen by 2.6%, yet with modestly rising wages inflation pressures have remained muted. Likewise, several manufacturing gauges, which had softened during the summer, appeared to recover. In sum, the US economy continues to muddle through. Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 5 Global Monetary Policy: Still the Only Game in Town We view fears of an end to the easy global monetary policy conditions as exaggerated. As evident by the various moves and non-moves in September, global central bankers are clearly committed to doing whatever it takes. In the US, we continue to expect a gradual tightening cycle given weak global conditions and mixed domestic data. Moreover, the Bank of Japan’s (BoJ) actions affirm that authorities deem additional stimulus tools as critical in a bid to strengthen the effectiveness of its monetary easing program in the battle against deflation. Moreover, the lack of progress towards the European Central Bank’s (ECB) inflation target suggests that an extension of the bank’s quantitative easing (QE) program by year end is increasingly probable, while the Bank of England (BoE) stands ready to provide additional stimulus should economic trends deteriorate. Importantly, though, we believe that global monetary policy needs to hand off to fiscal changes. As we noted in August (Global Perspective: Revving Up the Fiscal Engines 8/8/2016), targeted and sizeable fiscal stimulus would help keep global recessionary pressures under control, but structural constraints— most notably debt pressures and political inflexibility—will limit the scope and effectiveness of this expected fiscal push. The realities of the projected fiscal stimulus are that political willingness is lacking and the impact is weak as ultimately the money spent on infrastructure development programs, social endeavors and outright cash handouts will have to be borrowed, taxed or printed, thus bearing only meager and short-term stimulus consequences, and making monetary policy still critical and relevant. Political Pressures Manageable While we expect the market to continue to focus on monetary policy, deepening global political uncertainties are serving as an underlying nuisance on investor sentiment and market behavior. Europe’s economy continues to muddle along and political risks remain high. Italy will vote on an important constitutional referendum in December, Germany and France are set to hold general elections in 2017, and British Prime Minister Theresa May has suggested she will push ahead with triggering the formal Brexit process early next year. With the electoral uncertainty in the US, the deepening political bifurcations across the Eurozone, the long-term challenges posed by Brexit and even the sporadic pockets of unrest across the emerging markets universe, we sense global political trends will persist as an irritant to the stability of the global economy and the international financial markets. As we enter the last quarter of the year, we believe markets are becoming more accustomed to the realities of a lower global growth trajectory and more limited policy strength. Uncertainty surrounding global monetary policy as well as an increasingly- combative political backdrop remains. Still, we believe rising political pressures are broadly manageable, and underscore the structural underpinnings of an increasingly interdependent global economy. 0 50 100 150 200 250 300 350 2014 2015 2016 In th ou sa nd s Figure 2: Monthly Job Change Data Source: Bureau of Labor Statistics Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 6 Global Equity Despite the ongoing carousel of concerns, global equity markets have continued to move higher. As we enter the final quarter of the year, central bank policy action, US elections, and Italy’s referendum will come into focus. These events will likely lead to increased price fluctuations, and we expect to see at least one market hiccup before year end. Still, the underlying market trends remain positive, global recession risks remain low, and the fourth quarter historically has tended to be one of the strongest periods of the year. Thus, the bull market, albeit aged and less powerful, remains intact. Markets Are Proving Resilient If we told you at the beginning of 2016 that the global equity market would start January with double-digit declines, the United Kingdom would vote to leave the European Union, that US economic growth would average just 1.1% during the first half, and that the yield on the 10-year US Treasury would drop to a record low on the back of safe-haven buying and sluggish growth—most investors would probably ask how much stocks would be down. Instead, through the first nine-months of 2016, global equity markets are up a healthy clip, led by double-digit gains in emerging markets. Our view is that a very accommodative global monetary policy, a stable global economy, and a dearth of attractive investment options have supported stocks. In the fourth quarter, improved earnings trends and a slight tick up in global growth trends should allow stocks to continue to grind higher, but not without fits and starts along the way. Regional Outlook United States We continue to retain a US bias given its sturdier economic and earnings trends as well as its defensive characteristics. Moreover, US stocks rose to a record level in the third quarter. Historically, the S&P 500’s performance after making a new high for the first time in a year has been favorable, with stocks rising 12 months later 94% of the time with an average 16% return. Still given high absolute valuations, it will be important to see earnings improve, which is our expectation. One of the main reasons the US market had largely traded sideways until its recent breakout is forward earnings trends had also treaded water. Importantly, forward US earnings trends recently rose to a new high (Figure 3) as the outlook for energy sector profits are rebounding and the US dollar is now less of a headwind for multinational companies. Figure 3: US Stocks & Earnings Estimates Both at New Highs Data source: Factset; Earnings are 12-month forward earnings estimates $100 $110 $120 $130 $140 $150 800 1000 1200 1400 1600 1800 2000 2200 2400 '11 '12 '13 '14 '15 '16 S&P 500 vs. Earnings S&P 500 (L) Earnings Estimate Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 7 Beyond earnings, two main known issues investors will contend with is the November US Presidential election and the growing probability of a Fed rate hike before year end. In regard to the election, the market has tended to do better on a short-term basis if the incumbent party stays in office given this is largely seen as the status quo. On the other hand, a change of leadership tends to bring with it heightened uncertainty, and often a short-term market setback. However, we would urge investors not to make any drastic portfolio changes due to the election alone. Our works suggests where we are in the economic cycle, as well as other fundamental factors, such as valuations and earnings are overwhelmingly more important (see Market Perspective: Portfolios & Politics Don’t Mix, 8/4/16). Moreover, American companies are very dynamic, and once business owners know the rules of the game, they will adjust. Indeed, corporations are making record profits today, despite a sluggish economic recovery and increased regulation. Turning to the Fed, as long as economic data stays on the current trajectory, a rate hike is likely by year end. Indeed, the market is currently pricing in a 70% chance of a Fed increase by December. Consequently, we expect to see more of a sector rotation as a result of such a hike as opposed to a deep market pullback, given how well this potential rate increase has been telegraphed. From a sector perspective, higher rates should be helpful for financials – and we continue to favor regional banks given the cheap valuations and positive sensitivity to yields. Technology is another area that we see as market leadership given the sector has a combination of defensive and cyclical characteristics, positive earnings, large cash balances, reasonable valuations, and positive price trends. Non-US Developed Markets: De-emphasize We advise maintaining some exposure to non-US developed markets, but remain less sanguine about the prospects relative to the US and Emerging Markets (EM). Europe’s earning trends, while stable, are less strong than other regions. That said, we have been impressed by the resiliency of European indices given recent pressures on the banking system. Moreover, the UK’s equity market has done particularly well, partly as a result of the weaker British pound improving the competitiveness of exporters. The best thing going for Europe is that expectations appear low - as such a little good news could go a long way. Likewise, Japan’s economy continues to be challenged, but its equity market now trades at a significant discount to global equity, while monetary policy remains supportive. Stability in earnings trends is something we are watching and could move us to a more bullish view. Emerging Markets We are removing our tactical underweight of emerging markets (EM) relative to our global equity universe after seeing our thesis largely play out. For several years, we have advocated de-emphasizing emerging markets due to a sluggish economic growth outlook, weak earnings trends, falling commodity prices, a strong dollar, concerns around the Federal Reserve’s transition, and the need for structural changes. We are now seeing improvement in many of these factors, which supports a weighting closer to EM’s allocation in the global equity market. Three main points support a higher weighting. First, EM now ranks ahead of US and non-US developed markets on our composite scores, which include valuations, price momentum, and earnings, the latter of which should evidence steady support amid improving growth trends and stable exchange rates. Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 8 Next, EM still have catch up potential. Indeed, despite improved performance this year, EM has substantially trailed global equity over the past several years (Figure 4). Moreover, since peaking in 2011, EM has underperformed US markets on a total return basis by about 90% and trailed global equity by nearly 50%. Finally, an incrementally more positive view of this asset class is the cyclical EM growth slowdown of recent years is being gradually reversed as more competitive exchange rates, supportive fiscal and monetary conditions, targeted structural reform efforts, as well as a less-strong US dollar, a less aggressive Fed and low interest rates are aiding the Emerging Markets growth equation. Importantly, EM equity tends to outperform when the EM economic growth gap widens relative to developed equity markets (DM; Figure 5), which is happening for the first time since 2012. In a Lower-for-Longer world, EM’s growth premium appears attractive. Figure 4: EM Performance Cycle Turning Data source: MSCI; returns shown in USD on a net basis 0 50 100 150 200 250 300 350 400 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Emerging Markets Relative to Global Equity EM underperforming EM outperforming Figure 5: EM Equity Tends to Outperform When the EM Economic Growth Gap Widens Relative to DM Data source: Haver 0 20 40 60 80 100 120 140 160 -4% -2% 0% 2% 4% 6% 8% 1995 1997 1999 2002 2004 2006 2009 2011 2013 2016 Relative Economic Growth and Equity Performance GDP Spread: EM - DM (Left) EM performance relative to DM Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 9 Global Fixed Income Central bank policies remain front and center in driving rates but with limits to, and shrinking effectiveness of monetary policy, a shift to fiscal stimulus appears on the horizon. We advise positioning bond allocations at the low end of investment guideline ranges and focus on high quality, including government bonds, mortgage-backed securities, and investment-grade corporate and municipal bonds. We remain cautious on the non-investment grade portion of the credit markets and continue to avoid non-US fixed income. Negative- and Low-Interest Rate Policies at the Limit We expect yields to rise modestly amid global central bank policies’ reduced effectiveness, a shift to fiscal stimulus, and the Fed gradually raising rates. That said, global monetary policy is still very loose, and while the Fed is expected to raise rates once this year, it has lowered its growth forecast and indicated an even more gradual pace for interest rate increases going forward. Furthermore, global demand for yield continues to provide support for rates. Central bank policies remain front and center in driving rates. Interest in negative interest rate policies (NIRP) implemented by major central banks such as the European Central Bank (ECB) and the Bank of Japan (BoJ) appears to have waned over the last quarter as monetary policy is losing effectiveness. Further, there is concern over the impact of negative- to low-interest rates on banks and other financial institutions as well as pension funds. This policy hurts banks’ profitability and ability to lend. Recent central bank policy actions suggest a shift. The BoJ announced a move to target the yield curve rather than asset purchases; further downside for its key benchmark rate (currently at -0.1%) is likely limited. The ECB disappointed in September by not announcing additional policy measures, and the Fed signaled that a rate hike is likely by December. With limits to monetary policy, a shift to fiscal stimulus appears on the horizon, as evidenced by Japan’s fiscal stimulus package, as policy makers in the UK, Eurozone and the US look for economic solutions. However, the boost to global growth is expected to be modest― high levels of debt likely constrain the scope and depth of any projected global fiscal stimulus push. All in all, these developments should provide a floor for interest rates and some upward pressure on yields (Figure 6). Therefore, while interest rates should move higher over the near term, we believe they will remain in a lower range. Figure 6: Bond Yields are Off the Lows during the Brexit Turmoil Data Source: Factset 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 2.2% 2.4% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% D ec -1 5 Ja n- 16 Fe b- 16 M ar -1 6 M ar -1 6 Ap r- 16 M ay -1 6 M ay -1 6 Ju n- 16 Ju l- 16 Ju l- 16 Au g- 16 Se p- 16 Se p- 16 Japanese 10-Yr Govt Bond Yield (lhs) German 10-Yr Govt Bond Yield (lhs) US 10-Yr Treasury Yield (rhs) Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 10 Prefer High Quality Bonds Given this backdrop and our neutral portfolio stance, we advise positioning bond allocations at the low end of investment guideline ranges and focusing on high quality, including government bonds, mortgage- backed securities (MBS), and investment-grade corporate and municipal bonds. With bond allocations at the low end of ranges, we look to fixed income as a portfolio diversifier and stabilizer during risk-off periods such as at the beginning of 2016 and again during the Brexit turmoil in June. In this environment, where growth is hard to come by, financial markets are likely to overreact, and there are plenty of upcoming events expected to create choppiness such as the US elections, the constitutional referendum in Italy and the formal commencement of Brexit in early 2017. Mortgage-backed securities and corporate bonds provide a hedge in the event that rates move higher than expected; MBS have lower interest-rate sensitivity than governments and corporate bond spreads would likely tighten if rates increased because of an improving economy (Figure 7). Non-Investment Grade & Municipals We remain cautious on the non-investment grade portion of the credit markets. High yield corporate bonds have seen spreads narrow back to levels not seen since mid-2015, and valuations have become expensive as investors have sought higher yielding securities. While the stabilization in oil prices and easy monetary policies have provided support, we believe that the best days of the credit cycle are behind us. Banks have been tightening credit standards over the last year, and leverage has been on the rise. While municipal bonds have seen respectable performance this year, they have underperformed the taxable bond space; valuations were higher coming into 2016, and supply has been stronger than expected. Still, demand has stayed steady, and valuations are more reasonable at this time. Therefore, municipal bonds are still an attractive option for tax- sensitive investors. Non-US Fixed Income In the non-US bond space, Japanese interest rates moved up with the change in the BoJ’s policy offsetting gains in Eurozone and UK sovereign bonds while currency was additive to total returns. Yields are at very low levels in this space, and these bonds have higher sensitivity to changes in interest rates. Emerging markets debt has performed well this year with a weaker US dollar and stronger commodity prices. Still, while yields are more attractive in this space, we believe that the opportunities in commodities are limited and credit quality has declined. Therefore, we continue to stay on the sidelines in favor of high quality US bonds. Figure 7: MBS Tend to Outperform Government Bonds in Periods of Rising Rates Data Source: Factset 1.2% 1.4% 1.6% 1.8% 2.0% 2.2% 2.4% 95 96 97 98 99 100 101 D ec -1 5 Ja n- 16 Fe b- 16 M ar -1 6 M ar -1 6 Ap r- 16 M ay -1 6 M ay -1 6 Ju n- 16 Ju l- 16 Ju l- 16 Au g- 16 Se p- 16 MBS indexed relative to Government Bonds (lhs) 10-Year Treasury Yield (rhs) Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 11 Non-Traditional Strategy Our favored strategies are diversified hedge funds, market neutral hedged equity and managed futures in an environment where we believe the future upside in stocks and bonds has moderated. Therefore, we emphasize strategies less dependent on the direction of traditional markets. Less Directional Strategies Offer Ballast in Diversified Portfolios Broad-based hedge funds eked out gains for the seventh consecutive month as market choppiness moved higher by quarter end. Performance, however, was mixed across strategies with equity and credit- based hedge funds posting gains in the quarter while trend reversals in fixed income, the US dollar and commodities pressured managed futures (Figure 8). Nonetheless, we believe that in an environment with moderating fixed income and equity returns, non- traditional strategies should play an increasingly important role in diversified portfolios. They provide a partial hedge against market downturns, less correlated sources of returns and capital appreciation opportunities with minimal reliance on the direction of the stock market. Non-Traditional Anchor Allocation We recommend allocations to diversified hedge fund managers as an anchor to the non-traditional allocation in balanced portfolios as they have been shown to improve diversification, reduce volatility and smooth portfolio returns over time. Hedged Equity and Managed Futures Within hedged equity strategies, we prefer exposure to market neutral. Declining intra-stock correlations are generally favorable for hedged equity returns. However, we are beginning to see correlations among stocks rise, which creates challenges for directionally- positioned hedged equity managers. We, thus, prefer managers with low net market exposure, which should hold up better during periods of market stress. We also expect managed futures strategies to do well as the market cycle matures. These strategies capture opportunities across other areas of the global markets, like commodities, currencies and interest rates in a bi- directional fashion, meaning they have the ability to generate returns in bull and bear markets. Hedge funds may involve a high degree of risk, often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds often charge high fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. Managed Futures and commodity investing involve a high degree of risk and are not suitable for all investors. Investors could lose a substantial amount of money in a very short period of time. The amount you may lose is potentially unlimited and can exceed the amount you originally deposit with your broker. This is because trading security futures is highly leveraged, with a relatively small amount of money controlling assets having a much greater value. Investors who are uncomfortable with this level of risk should not trade managed futures or commodities. Figure 8: HFRX Hedge Fund Returns Data Source: Factset 2.2% 0.9% 3.4% -0.8% -0.7% -1.2% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% Global Hedge Fund Absolute Return Equity Hedge Macro/CTA QTD YTD 0.7% 1.3% Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 12 Performance Summary Rates (%) 9/30/16 6/30/16 3/31/16 12/31/15 9/30/15 U.S. Fed Funds Target 0.50 0.50 0.50 0.50 0.50 European Central Bank Rate 0.00 0.00 0.00 0.00 0.05 Bank of England Rate 0.25 0.25 0.50 0.50 0.50 Bank of Japan Rate -0.10 -0.10 -0.10 -0.10 0.10 USA LIBOR - 3 Month 0.85 0.85 0.65 0.63 0.61 TED Spread (bps) - 3 Month 0.58 0.58 0.40 0.42 0.44 2 Yr U.S. Treasury 0.76 0.76 0.58 0.72 1.06 10 Yr U.S. Treasury 1.60 1.60 1.47 1.77 2.27 10-2 yr slope 0.83 0.83 0.89 1.05 1.21 Barclays Municipal Bond Blend 1-15 Year (YTW) 1.55 1.55 1.36 1.60 1.78 BofAML High Yield Master (YTW) 6.25 6.25 7.36 8.39 8.77 BofAML Corporate Master (YTW) 2.85 2.85 2.90 3.21 3.69 Currencies 9/30/16 6/30/16 3/31/16 12/31/15 9/30/15 Euro ($/€) 1.12 1.11 1.14 1.09 1.12 Yen (¥/$) 101.27 102.59 112.40 120.30 119.77 GBP ($/£) 1.30 1.34 1.44 1.47 1.51 Commodities 9/30/16 6/30/16 3/31/16 12/31/15 9/30/15 Light Crude Oil ($/barrel) 48.24 48.33 38.34 37.04 45.09 Gold ($/ozt) 1,317.10 1,320.60 1,235.60 1,060.20 1,115.20 CBOE Volatility Index 9/30/16 6/30/16 3/31/16 12/31/15 9/30/15 CBOE VIX 13.29 15.63 13.95 18.21 24.50 Data source: FactSet Major Market Returns through September 2016 Important Disclosures: All information is as of title date unless otherwise noted. This document was prepared for clients of SunTrust Bank for informational purposes only. This material may not be suitable for all investors and may not be redistributed in whole or part. Neither SunTrust Bank, nor any affiliates make any representation or warranties as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable, but are not guaranteed. Comments and general market related projections are based on information available at the time of writing and believed to be accurate; are for informational purposes only, are not intended as individual or specific advice, may not represent the opinions of the entire firm and may not be relied upon for future investing. The views expressed may change at any time. The information provided in this report should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored or provided by SunTrust Bank or its affiliates or agents. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decisions. Past returns are not indicative of future results. An investment cannot be made into an index. 5.3 3.9 6.4 9.0 0.5 5.5 -0.2 0.6 -3.9 2.2 6.6 7.8 1.7 16.0 5.8 15.3 3.2 14.2 8.9 1.3 12.0 15.4 6.5 16.8 5.2 12.8 4.3 12.6 -2.6 0.7 5.2 11.2 0.5 -0.6 4.0 5.3 4.2 1.2 -12.3 -0.2 -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 20.00 G lo ba l S to ck s U S La rg e Ca p N on -U S D ev el op ed Em er gi ng M ar ke ts U S Co re B on ds H ig h Yi el d Bo nd s M un ic ip al B on ds N on -U S Bo nd s Co m m od it ie s G lo ba l H ed ge F un ds QTD YTD 1 Yr 3 Yr Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 13 Publication Details Authors Jennifer Capouya, CFA, CFP®, CTFA, AIF Deputy Chief Investment Officer Director of Portfolio & Market Strategy SunTrust Bank & GenSpring Family Offices Keith Lerner, CFA, CMT Chief Market Strategist, SunTrust Bank Michael Skordeles, AIF Senior Market Strategist, SunTrust Bank Shelly Simpson, CFA, CAIA Senior Portfolio Strategist, SunTrust Bank Sabrina Bowens-Richard, CFA, CAIA Senior Portfolio Strategist, SunTrust Bank Aryam Vázquez Senior Global Macro Strategist, SunTrust Bank & GenSpring Family Offices Emily Novick, CFA, CFP® Portfolio Strategist, SunTrust Bank Contributors Gregory Miller Chief Economist, SunTrust Bank Andrew Richman, CTFA Director of Fixed Income Strategy SunTrust Bank & GenSpring Family Offices Aki Pampush, CFA, CPA Director of Equity Strategy, SunTrust Bank Editors Oliver Merten, CFA, CFP® Director of Investment Communications SunTrust Bank & GenSpring Family Offices Amy Hanson Investment Communications Associate SunTrust Bank & GenSpring Family Offices Portfolio & M arket Strategy G roup Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 14 Important Disclosures Advisory managed account programs entail risks, including possible loss of principal and may not be suitable for all investors. Please speak to your advisor to request a firm brochure which includes program details, including risks, fees and expenses. Services provided by the following affiliates of SunTrust Banks, Inc.: Banking products and services are provided by SunTrust Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank, SunTrust Delaware Trust Company and SunTrust Banks Trust Company (Cayman) Limited. Securities, brokerage accounts, insurance (including annuities) and investment advisory products and services are offered by SunTrust Investment Services, Inc., a SEC registered investment adviser and broker-dealer, member FINRA, SIPC, and a licensed insurance agency. Investment advisory services are offered by SunTrust Advisory Services LLC, SunTrust Investment Services, Inc., and GenSpring Family Offices, LLC, each of which is registered as an investment adviser with the US Securities and Exchange Commission. SunTrust Bank and its affiliates and the directors, officers, employees and agents of SunTrust Bank and its affiliates (collectively, "SunTrust") are not permitted to give legal or tax advice. Clients of SunTrust should consult with their legal and tax advisors prior to entering into any financial transaction. Investment and Insurance Products: •Are not FDIC or any other Government Agency Insured •Are not Bank Guaranteed •May Lose Value The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but SunTrust Investment Services, Inc. (STIS) makes no representation or guarantee as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. The information contained herein does not purport to be a complete analysis of any security, company, or industry involved. This material is not to be construed as an offer to sell or a solicitation of an offer to buy any security. Opinions and information expressed herein are subject to change without notice. SunTrust Bank and/or its affiliates, including your Advisor, may have issued materials that are inconsistent with or may reach different conclusions than those represented in this commentary, and all opinions and information are believed to be reflective of judgments and opinions as of the date that material was originally published. SunTrust Bank is under no obligation to ensure that other materials are brought to the attention of any recipient of this commentary. The information and material presented in this commentary are for general information only and do not specifically address individual investment objectives, financial situations or the particular needs of any specific person who may receive this commentary. Investing in any security or investment strategies discussed herein may not be suitable for you, and you may want to consult a financial advisor. Nothing in this material constitutes individual investment, legal or tax advise. Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance. STIS shall accept no liability for any loss arising from the use of this material, nor shall STIS treat any recipient of this material as a customer or client simply by virtue of the receipt of this material. The information herein is for persons residing in the United States of America only and is not intended for any person in any other jurisdiction. Investors may be prohibited in certain states from purchasing some over-the-counter securities mentioned herein. The information contained in this material is produced and copyrighted by SunTrust Banks, Inc. and any unauthorized use, duplication, redistribution or disclosure is prohibited by law. STIS’s officers, employees, agents and/or affiliates may have positions in securities, options, rights, or warrants mentioned or discussed in this material. Asset Allocation does not assure a profit or protect against loss in declining financial markets. Past performance is not an indication of future results. Fixed Income Securities are subject to interest rate risk, credit risk, prepayment risk, market risk, and reinvestment risk. Fixed Income Securities, if held to maturity, may provide a fixed rate of return and a fixed principal value. Fixed Income Securities prices fluctuate and when redeemed, may be worth more or less than their original cost. High Yield Fixed Income Investments, also known as junk bonds, are considered speculative, involve greater risk of default and tend to be more volatile than investment grade fixed income securities. International investing entails greater risk, as well as greater potential rewards compared to US investing. These risks include potential economic uncertainties of foreign countries as well as the risk of currency fluctuations. These risks are magnified in emerging market countries, since these countries may have relatively unstable governments and less established markets and economies. Investing in smaller companies involves greater risks not associated with investing in more established companies, such as business risk, significant stock price fluctuations, and illiquidity. Emerging Markets: Investing in the securities of such companies and countries involves certain considerations not usually associated with investing in developed countries, including unstable political and economic conditions, adverse geopolitical developments, price volatility, lack of liquidity, and fluctuations in currency exchange rates. Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 15 Asset classes are represented by the following indexes: MSCI ACWI index (Morgan Stanley Capital International All Country World) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI ACWI consists of 45 country indices comprising 24 developed and 21 emerging market country indices. MSCI World captures large and mid cap representation across 23 Developed Markets countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country. MSCI EM index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. MSCI EAFE index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. MSCI USA Index is designed to measure the performance of the large and mid cap segments of the US market. With 640 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in the US. Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. S&P 500 Index is comprised of 500 widely-held securities considered to be representative of the stock market in general. NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based Index. Russell 1000 index is a measure of the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. Russell 3000 index measures the performance of the 3000 largest US companies based on total market capitalization, which represents approximately 98% of the investable US equity market. Russell Mid Cap index is a measure of the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies. Russell 2000 Index is comprised of 2000 smaller company stocks and is generally used as a measure of small-cap stock performance. FTSE NAREIT US Real Estate Index Series is designed to present investors with a comprehensive family of REIT performance indexes that span the commercial real estate space across the US economy, offering exposure to all investment and property sectors. Bloomberg Commodity Index is composed of futures contracts on physical commodities. It currently includes 22 commodity futures in six sectors. The weightings of the commodities are calculated in accordance with rules that ensure that the relative proportion of each of the underlying individual commodities reflects its global economic significance and market liquidity. Barclays Aggregate Bond Index is the broadest measure of the taxable U.S. bond market, including most Treasury, agency, corporate, mortgage-backed, asset- backed, and international dollar-denominated issues, all with investment-grade ratings (rated Baa3 or above by Moody’s) and maturities of one year or more. Barclays Intermediate Government/Credit index represents securities that are SEC-registered, taxable, and dollar denominated. The index measures the performance of U.S. Dollar denominated U.S. Treasuries, government-related and investment grade U.S. corporate securities that have a remaining maturity of greater than one year and less than ten years. Barclays US MBS Fixed Rate Index covers agency mortgage-backed pass-through securities (both fixed-rate and hybrid ARM) issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). Pool aggregates must have at least USA 250mn current outstanding, fixed-rate pool aggregates comprise individual TBA deliverable MBS pools mapped on the basis of agency, program, coupon, and origination year of the pool. Rated investment-grade (Baa3/BBB-/BBB-) or higher using the middle rating of Moody’s, S&P, and Fitch after dropping the highest and lowest available ratings. When a rating from only two agencies is available, the lower (“more conservative”) is used. When a rating from only one agency is available, that is used to determine index eligibility. Pool aggregates must have a weighted average maturity of at least 1 year. BofA Merrill Lynch Treasury Master is an unmanaged index tracking government securities. BofA Merrill Lynch U.S. Inflation-Linked Treasury Index: Tracks the performance of U.S. dollar denominated inflation linked sovereign debt publicly issued by the U.S. government in its domestic market. Qualifying securities must have at least one year remaining term to final maturity, interest and principal payments tied to inflation and a minimum amount outstanding of $1 billion. Strips are excluded from the Index; however, original issue zero coupon bonds are included in the Index and the amounts outstanding of qualifying coupon securities are not reduced by any portions that have been stripped. Barclays U.S. Treasury Bellwether Indices are a series of benchmarks tracking the performance and attributes of six on-the-run U.S. Treasuries that reflect the most recently issued 3m, 6m, 2y, 3y, 5y, 10y, and 30y securities. The bellwether indices follow Barclays index monthly rebalancing conventions. Barclays Municipal Bond Blend 1-15 Year (1-17 Y) is an unmanaged index of municipal bonds with a minimum credit rating of at least Baa, issued as part of a deal of at least $50 million, that have a maturity value of at least $5 million and a maturity range of 12 to 17 years. BofAML U.S. Corporate Master is an unmanaged index comprised of U.S. dollar denominated investment grade corporate debt securities publicly issued in the U.S. domestic market with at least one year remaining term to final maturity. BofAML US HY Master index is an index that tracks US dollar denominated below investment grade corporate debt publicly issued in the US domestic market. Citigroup Non-USD WGBI (USD) is an index covering thirteen government-bond markets: Australia, Austria, Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, and the United Kingdom. For inclusion in this index, a market must total at least (U.S.) $20 billion for three consecutive months. Citigroup Non-USD WGBI (USD) Hedged is an index where the currency exposure is hedged and covers government-bond markets including the following: Australia, Austria, Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, and the United Kingdom. Past performance is not indicative of future results. Please see Important Disclosures for additional information. SunTrust Investment Insights | October 2016 16 JP Morgan GBI-EM Global Diversified Composite is a comprehensive emerging market debt index that tracks local currency bonds issued by Emerging Market governments. It includes only those countries that are directly accessible by most of the international investor base
Financial news from around the internet.
Publishing documents on edocr is a proven way to start demand generation for your products and services. Thousands of professionals and businesses publish marketing (brochures, data sheets, press releases, white papers and case studies), sales (slides, price lists and pro-forma agreements), operations (specifications, operating manuals, installation guides), customer service (user manuals) and financial (annual reports and financial statements) documents making it easier for prospects and customers to find content, helping them to make informed decisions. #SEO #leadgen #content #analytics
I am an accomplished content marketing professional helping you to build your brand and business. In my current role, I fulfill a multi-faceted solution marketplace including: publishing and sharing your content, embedding a document viewer on your website, improving your content’s search engine optimization, generating leads with gated content and earning money by selling your documents. I gobble up documents, storing them for safekeeping and releasing the text for excellent search engine optimization, lead generation and earned income.
Publishing documents on edocr.com is a proven way to start demand generation for your products and services. Thousands of professionals and businesses publish marketing, sales, operations, customer service and financial documents making it easier for prospects and customers to find content, helping them to make informed decisions.
Get publishing now!