S&P 500 recovers its losses from earlier in May
04 Jun 2021The month of May was split in two halves for the S&P 500 Index. The Index was down in the first half but recouped its losses in the second. Energy was the top performing sector in the index last month as oil prices continued to build positive momentum.
US dollar remains weak with no change in stance from the Fed
04 Jun 2021The US Federal Reserve (Fed) has yet to shift its policy stance from continuous ongoing accommodation despite the sharp increase in inflation. As a result, the US dollar basket ended the month of May just below 90 – compared to around 98 at the same time last year.
Aluminium buoyed by structural deficit concerns
28 May 2021Aluminium’s rally has been catalysed by environmental considerations since March. As part of China’s net zero carbon emissions by 2060 goal, the country has been cutting on its coal intensive aluminium production this year. The reduction in supply, therefore, is unlikely to be temporary and presents structural supply challenges for the metal. If these issues persist, aluminium may be in a supply deficit in the coming years.
Inflation helps gold build positive momentum
28 May 2021The price of gold had dropped below $1700/oz in March. It appears that over the first quarter of this year, gold was transitioning from being a safe-haven asset – which was its primary role last year – to becoming an inflation hedge. This transition has accelerated in the second quarter especially since US consumer price index (CPI) inflation came out at 4.2% for April – well above consensus estimates. As of 26 May, gold is on the cusp on $1900/oz.
Sharp decline in the ‘fear index’ signals equity market optimism
28 May 2021The Chicago Board Options Exchange (CBOE) Volatility Index has dropped to around 17 (as of 26 May) after spiking to around 28 earlier in the month. Most major equity indices have been steadily positive during the month of May, apart from the tech heavy NASDAQ Index. As of 26 May, the Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) Index was up just over 1% while the NASDAQ Index was down 1.5% as inflation concerns still loom over the tech sector.
Agriculture in the lead but industrial metals not far behind
21 May 2021Looking at 1-month performance to 17 May, agricultural commodities have made gains of 10.5% while industrial metals are up 9.4% (Source: Bloomberg based on Bloomberg total return indices for sector baskets). Over the period, soybean oil, coffee, and corn were among the top agricultural commodities while copper, nickel, and tin led the way among industrial metals.
Small caps are making their presence felt this year
21 May 2021Small cap stocks typically tend to perform well in cyclical upswings due to their strong relationship with the underlying economy. This year, small caps have outpaced large caps by 5% in the US and almost 2% in Europe in USD and EUR respectively (based on MSCI Small Cap and Large Cap indices for respective regions with data sourced from Bloomberg as of 19 May 2021).
VIX experiences new bouts of volatility
21 May 2021The CBOE Volatility Index (VIX), that has generally been trending downwards this year, has experienced a couple of spikes in May. US equity investors continue to keep a close eye on policy announcements from the Federal Reserve as rising levels of inflation have raised the possibility of the central bank cutting some of its crisis measures of monetary accommodation.
Energy prices rise in the wake of Colonial cyber attack
14 May 2021Colonial Pipeline Co., a gasoline supplier, diesel, and jet fuel to the eastern US, was forced to halt operations on Friday 07 May due to a ransomware attack that affected some of its IT systems. Colonial Pipeline Co is the largest US oil-products pipeline (with a capacity to transport 2.5mn barrels of gasoline and other oil products per day). With little clarity over when the pipeline’s full capacity will be restored, crude oil prices are climbing along with gasoline. This has also led to an increase in the crack spread of US gasoline versus WTI Crude oil.
Inflation expectations continue to rise as realised inflation ticks up
14 May 2021The annual inflation rate in the US jumped to 4.2% in April – beating consensus estimates of 3.6% (source Trading Economics). The annual inflation rate ex-food and energy followed this trend and rose to 3.0% against consensus estimates of 2.3%. US Treasury yields, broad commodities, gold, and growth equities are likely to be among the asset classes most heavily affected by this.