Market Share Newsletter Vol 1 Issue 7

The Economy

• In October, inflation in the United States, based on the Consumer Price Index (CPI), grew at a pace faster than expected. Although 0.3% was the forecast, the CPI increased by 0.4%. However, over the past 12 months, the increase was 1.8% which is still below the target of 2%. Core inflation (which excludes food and energy) is the Federal Reserve’s preferred measure of inflation and it increased by 0.2% in October. These factors contributed to inflation receiving less headline news in the U.S.
• The number of job openings in the U.S. has started to decline since reaching an all-time high in November 2018 but have been greater than 7 million for 18 consecutive months. As of October 31, 2019, there were only 5.8 million unemployed workers in the labor force.
• Germany reported a surprise quarter of economic growth, although only 0.1% in the third quarter, this did keep them out of official recession territory. The Eurozone increased by 0.2% for the same time period—slightly better than Germany.

Equities

• Walmart, the United States’ largest retailer, reported strong third quarter earnings of $1.16/share vs. an estimate of $1.09/share. Walmart continues to see its e-commerce segment grow (+41% year-over-year), driven in large part this quarter by strong grocery sales. The company also raised its 2019 earnings outlook ahead of this year’s holiday season.
• Walt Disney Co. launched its brand-new streaming service, Disney+, on November 12, 2019. The company reported that demand for the product exceeded their expectations as more than 10 million people signed up on the first day. Shares of Disney rose more than 7% following that announcement.
• Thanks to a combination of better-than-expected corporate earnings and an easing of trade tensions between the U.S. and China, we saw international equities (measured by the iShares MSCI EAFE ETF) outpace the S&P 500 by 1.31% in the last three months.

Source: Bloomberg

Fixed Income

• A recent Bloomberg article highlighted the increased utilization of bank loans (or “term loans”) by investment grade companies, specifically Bristol-Myers and Broadcom, as they are aiming to keep high-investment grade ratings. According to Bloomberg data, investment grade term loans have increased by 21% this year, while investment grade bond sales have declined.
• On this day 40 years ago, the ten-year U.S. Treasury note was yielding 10.75% and core inflation (removing food and energy) had most recently been reported at an annual increase of 10.1%. Today, we sit at approximately 1.83% on the 10-year Treasury and Core CPI (inflation) most recently read 2.3%.
• The 30-year German bund, most recently issued with a 0% coupon, has fallen in value by almost 13% since its high on August 28. The total amount of global debt with negative yields has fallen from its high of $17 trillion on August 29 to $11.85 trillion.

Fixed Income Index Yields & Total Returns
	Yield	YTD	1-Year
B’berg Barclays Inter Govt./Credit	1.98%	6.34%	8.06%
B’berg Barclays US Aggregate Bond	2.35%	8.10%	10.51%
B’berg Barclays US Corp. High Yield	5.71%	11.87%	9.04%
B’berg Barclays Municipal Bond	1.91%	6.53%	8.90%
Key Interest Rates
	10/29/19	12/31/18	11/2/14
Federal Funds Target Rate	1.5-1.75%	2.25-2.5%	0-0.25%
3-Month LIBOR	1.91%	2.81%	0.23%
2-Year U.S. Treasury Note	1.64%	2.49%	0.51%
10-Year U.S. Treasury Note	1.89%	2.68%	2.32%
Prime Rate	4.75%	5.50%	3.25%

Source: Bloomberg