Weekly Commentary: 11 Dec 2023 – 17 Dec 2023
Major US equity benchmarks closed at their highest level of the year last Friday. The US added 199000 jobs last month, slower than earlier in the year, and to exclude the effects of auto-worker strikes in recent months, November’s job gain would be roughly 169000, slightly cooler than 180000 in October. Healthcare and the government account for most of the recent hiring. With the recent job gains moderating and easing inflation, The Federal Reserve is poised to hold rates steady at next week’s meeting with the view of expecting to cut rates next year. Central banks around the world have also been holding rates steady; The Bank of Canada held its policy interest rate unchanged at 5%, citing higher rates are slowing price increases across the economy and they are also not thought of raising rates.
China faces a deepening deflation problem as the CPI Index dropped 0.5% in November from a year ago and analysts had been expecting a 0.1% decrease. The drop also marks a worsened condition compared to October, where the CPI fell 0.2% from a year earlier
Stock returns were positive over the week as observed across the following 3 indices, with the Dow Jones Industrial Average (+0.04%), S&P 500 Index (+0.24%), and NASDAQ Composite Index (+0.70%). Other notable key market indices that generated positive returns consist of the MSCI AC ASEAN Index (+0.01%) & MSCI World (+0.24%). All S&P 500 sectors registered positive returns last week with notable sectors – Communication Services (+1.41%), Information Technology (+0.74%), and Consumer Discretionary (+1.15%) falling more than the rest of the sector. For 2022, index returns were negative for the Dow Jones Industrial Average (-8.78%), S&P 500 (-19.44%), and the NASDAQ Composite (-33.10%).
The yield curve remains inverted as the 10Y-2Y US Treasury spread widened for the week by -0.49%. driven by U.S 2-year and 10-year Treasury yields rising 20 bps to 4.74% and rising 5 bps to 4.25% respectively. Market sentiment also became more risk-off as the U.S. High Yield (HY) – Investment Grade (IG) credit spread tightened 14 bps to 2.55% while the CBOE Volatility Index (VIX) fell 28 bps to 12.35%.
This coming week, The US Federal Reserve, The European Central Bank, and the Bank of England will be making their interest rate call.
The global REITs market’s return was mostly mixed across the numerous benchmarks. FTSE EPRA Nareit France Index (+2.53%) and FTSE EPRA Nareit Canada Index (+2,03%) are the notable REITs that generated positive returns over the past week. Closer to home, the iEdge S-REIT Index (+2.19%) and all of its subsectors generated positive weekly returns with Office REITs (+5.03%) and Data Center REITs (+3.10%), the notable sector that outperformed the rest last week. REITs generally have been affected by decreasing yield spread as interest rates surged and investors price in the possibility of reduced distributions stemming from higher financing costs. However, we do expect inflows to return to the sector given the existing attractive valuations on offer and resilience offered by the REIT asset class in light of the waning global growth outlook.
Important Information
This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.
An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.
Investments are subject to investment risks including the possible loss of the principal amount invested, and are not obligations of, deposits in, guaranteed or insured by PCM or any of its subsidiaries, associates, affiliates or PDs. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved. Any use of financial derivative instruments will be for hedging and/or for efficient portfolio management. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products. The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.
The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.
The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. This advertisement has not been reviewed by the Monetary Authority of Singapore.