Brief: Hedge funds’ nine-month consecutive run of positive returns has been halted, with managers ending last month in the red as market volatility and renewed uncertainty over the impact of coronavirus variants. Hedge Fund Research’s main industry-wide benchmark, the HFR Fund Weighted Composite Index – which tracks the monthly returns of some 1400 single manager hedge funds across all strategy types – lost 0.60 per cent in July, its first down month since September 2020. The dent means hedge funds have now returned 9.45 per cent gain since the start of 2021. Before last month, the industry’s January-to-June advance – a rise of some 10 per cent – had been its best first-half performance since 1999, according to HFR data.
Brief: For the first quarter since the onset of the pandemic, the health of the UK’s Defined Benefit (DB) pensions schemes failed to improve, ending what had been four consecutive quarters of growth. However, it should be noted that funding levels remain far stronger than their pre-Covid levels, according to Legal & General Investment Management (LGIM). LGIM's Health Tracker, a monitor of the current health of UK DB pension schemes, found that the average1 DB scheme can expect to pay 98.2 per cent of accrued pension benefits as of 30 June 2021, the same figure recorded on 31 March 20212. The health of the UK’s Defined Benefit (DB) pension schemes had originally dropped as low as 91.4 per cent as of 31 March 2020, following the onset of the pandemic, having previously been at 96.5 per cent as of 31 December 20194. LGIM’s monitor has since shown a continuing improvement in each of the last four quarters, which has been brought to an end with the latest data.
Brief: Stocks fell Monday, losing some steam after rising to all-time highs late last week. Commodity prices tumbled as concerns over the coronavirus's spread resurged, with crude oil prices moving sharply to the downside. The S&P 500 fell as shares of oil companies including Occidental Petroleum (OXY), Apache Corporation (APA) and Diamondback Energy (FANG) dropped. The Dow also dipped, weighed down by a decline in shares of Chevron (CVX). U.S. West Texas intermediate crude oil futures (CL=F) dropped more than 4% at session lows Monday morning to hover around $65 per barrel, extending a more than 7.5% weekly decline last week. Brent crude (BZ=F), the international standard, also dropped. Other commodities also dipped Monday morning, including with copper, silver and gold futures each moving lower by at least 1%. Treasury yields fell across the curve, and the benchmark 10-year yield retreated to below 1.28%.
Brief: The S&P 500 is poised for its fastest 100% recovery in history and investors remain bullish on the US equity market but advise caution on the sustainability of such a rapid recovery. From its 20 March 2020 low point to 6 August 2021, the S&P 500 has risen 95% in under 17 months, according to data from FE fundinfo, well ahead of the pace of the current record recovery following the Global Financial Crisis, which took two years. While nothing is guaranteed, Juliet Schooling Latter, research director at Chelsea Financial Services, believes it is "highly likely" the previous record will be broken given the strength of US earnings combined with current monetary policy. "The difference between this crisis and post-GFC is that we have had faster and bigger amounts of fiscal stimulus which are helping us to recover faster," she explained. "The earnings growth is also extremely strong. People have been calling [it] another tech bubble because they have been focusing on share price charts for tech companies.
Brief: Goldman Sachs sees the U.S. labor market maintaining its momentum well into 2022. Economists at the firm led by Jan Hatzius lowered their year-end 2021 unemployment rate forecast slightly to 4.1% on Monday. For 2022, Hatzius and his team projects a 3.5% unemployment rate. If achieved, the unemployment rate would be at a 50-year low as the economy powers back from the COVID-19 pandemic. Employment at those levels in 2022 would bring the economy to full employment, Hatzius says. "We expect further solid job gains in the rest of the year. One reason is that labor demand remains very strong. We also see further scope for fairly quick job gains from additional reopening, the expiration of federal unemployment benefits, and the return of in-person school," explains Hatzius.