NEPC’s May 2024 Market Commentary
NEPC Blog
by NEPC Research
2d ago
Stocks and bonds defied the adage, “sell in May and go away,” ending the month in the black. The much anticipated earnings of Nvidia beat expectations again, fueling a rally in growth stocks and supporting broader market returns. The S&P 500 Index returned 5% in May, pushing year-to-date gains to 11.3%. Outside the United States, some softening in the U.S. dollar bolstered local currency returns with the MSCI EAFE and MSCI Emerging Markets indexes up 3.9% and 0.6%, respectively. Meanwhile, mixed economic data and signs of softening inflationary pressures rejiggered the market’s  exp ..read more
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NEPC’s May 2024 Market Commentary
NEPC Blog
by NEPC Research
2d ago
Stocks and bonds defied the adage, “sell in May and go away,” ending the month in the black. The much anticipated earnings of Nvidia beat expectations again, fueling a rally in growth stocks and supporting broader market returns. The S&P 500 Index returned 5% in May, pushing year-to-date gains to 11.3%. Outside the United States, some softening in the U.S. dollar bolstered local currency returns with the MSCI EAFE and MSCI Emerging Markets indexes up 3.9% and 0.6%, respectively.   Meanwhile, mixed economic data and signs of softening inflationary pressures rejiggered the market’s&nb ..read more
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Street Smarts: What Does China’s 1 Trillion Yuan Debt Raise Mean for Investors?
NEPC Blog
by Jennifer Appel, CFA, Senior Investment Director, Asset Allocation
3w ago
NEPC examines the potential effects of China’s plan to raise 1 trillion yuan—or $138 billion—in long-term bonds to invigorate its economy. We turn to Jennifer Appel, CFA, Senior Investment Director, Asset Allocation, to understand the implications of this debt issuance for investment portfolios. 1.What prompted this move by the Chinese government? Chinese policymakers are attempting to stimulate the economy through funding aimed at supporting strategic initiatives. The bond issuance reinforces the government’s commitment to achieving a 5% growth rate this year, even as the economy battles we ..read more
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Street Smarts: Responding to a Strong Dollar
NEPC Blog
by Phillip R. Nelson, CFA, Partner, Head of Asset Allocation
1M ago
Given the growing strength of the U.S. dollar, Phillip Nelson, NEPC’s head of asset allocation, provides an update on our strategic view on currency hedging programs, portfolio rebalancing and monetary policy. 1. What do you attribute to the recent rise of the U.S. dollar? Recent gains in the U.S. dollar, relative to a basket of developed market currencies and/or MSCI EAFE exposure, are associated with a weaker Japanese yen. The yen is down nearly 10% for the year and is under pressure from a longstanding easy monetary policy in Japan relative to the Fed’s more hawkish stance on interest rat ..read more
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NEPC’s April 2024 Market Commentary
NEPC Blog
by NEPC Research
1M ago
The S&P sold off 4.1% in April with equity markets reacting to rising interest rates and elevated inflation prints. Large-cap stocks outperformed, while small-cap stocks continue to be sensitive to long-term interest rates with the Russell 2000 selling off 7% for the month. Outside the U.S., the MSCI Emerging Markets Index added 0.4% in April. Led by strong results in China, the MSCI China Index returned 6.6% last month, buoyed by supportive industrial economic data and corporate earnings growth. Meanwhile, the MSCI EAFE Index lagged, dropping 2.6% as a strong dollar was a headwind for m ..read more
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Taking Stock: NEPC’s April 2024 Pension Monitor
NEPC Blog
by NEPC
1M ago
In April, pension plan sponsors experienced higher liability discount rates amid a rise in U.S. Treasury yields. During this period, global public equities declined, and the Treasury yield curve rose across most tenors. Total-return-focused plans likely experienced positive changes in funded status due to higher discount rates despite losses from public equities. NEPC’s hypothetical total-return pension plan saw an improvement of 2.6% in funded status compared to 0.2% decrease for our LDI-focused plan. Rate Movement Commentary The Treasury yield curve rose in April, and remained inverted fro ..read more
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Quarterly Asset Class Review: Q1 2024
NEPC Blog
by NEPC Research
1M ago
Global Equities Equities continued their winning streak, posting strong gains in the first quarter. U.S. stocks led performance, bolstered by stronger-than-expected economic data, robust corporate profits, a resilient labor market and consumer confidence. The S&P 500 Index fueled gains of over 10% for the three months ended March 31, while the NASDAQ was up around 9%. During this period, over half the stocks—dominated by growth and technology names—in the S&P 500 hit new 52-week highs. Domestic small-cap equities returned around 5% in the first quarter, lagging their large-cap counter ..read more
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Street Smarts: Markets Brace for No Rate Cuts in 2024
NEPC Blog
by Phillip R. Nelson, CFA, Partner, Head of Asset Allocation
1M ago
The Federal Open Market Committee (FOMC) is holding its next meeting on April 30 and May 1. This time around, market participants largely expect the central bank to leave rates unchanged at a target of 5.25%-5.50% amid still elevated inflation levels. Phillip Nelson, NEPC’s head of asset allocation, shares his insights into interest rates, monetary policy and our economic and investment outlooks. 1. When can markets expect the Federal Reserve to start cutting rates? The Federal Reserve’s bias is to cut interest rates. But the inflation data so far this year is coming in consistently more ele ..read more
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Taking Stock: NEPC’s Q1 2024 Pension Monitor
NEPC Blog
by NEPC
2M ago
Rising Treasury rates combined with strong equity performance led to higher funded ratios for many U.S. corporate pension plans in the first quarter. Equities rallied in the three months ended March 31 and return-seeking assets contributed to a material improvement in funded ratios. Those gains were complemented by decreases in liabilities driven by increasing Treasury yields. Global equities were also up in the third quarter. Estimated discount rates for pension liabilities, based on long-duration fixed-income yields, rose approximately 24 basis points. We estimate the funded status of our ..read more
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NEPC’s March 2024 Market Commentary
NEPC Blog
by NEPC Research
2M ago
All asset classes were in the black in March as markets saw no signs of an economic slowdown in the U.S. in the first quarter, while the Federal Reserve continues its efforts to steer the economy to a safe landing. Markets have priced in a safe landing—a stable path back to inflation of 2% with no recession along the way. So far, the labor market has been resilient with inflation moderating. That said, the path to the Fed’s inflation target of 2% remains unclear. Commentary from the central bank and the FOMC interest-rate dot plot data from March indicates a willingness to allow inflation to ..read more
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