MONTHLY MARKET REPORT: April 2018

MONTHLY MARKET REPORT:  April 2018

Prepared by Brandon Yee, CFA, CAIA, and Thomas Connelly, CFA

Developed Markets

Developed Markets

Commentary

Developed Markets Bounce Back– In the month of April, developed stock markets rose. The UK and the Pacific ex Japan markets recorded gains of 4.83% and 3.11%, respectively. The U.S. and Japan were relatively flat, but Japan is up 1.51% in 2018. Developed markets had a strong trailing twelve month performance of 14.11%, with Japan doing most of the heavy lifting.

Emerging Markets

Versant Emerging Markets

Commentary

Emerging Markets Flat – Broader emerging markets dropped 0.89% in April. India and Korea posted strong returns of 4.12% and 2.75%, respectively. Russia and Brazil fell the most in April, losing 7.43% and 3.99%, respectively. The Chinese market was flat for the month, but recorded a strong one year performance of 35.27%. China’s financial markets are increasingly being opened to foreign investors. These developments will have a material impact on portfolio allocation decisions going forward.

Global Sector

Versant Global Sector

Commentary

Energy Post Gains- Energy and consumer discretionary posted gains of 9.20% and 2.59%, respectively. Consumer staples and industrials dropped the most in April. Information technology pulled back, but the sector is still up 2.86% in 2018. Growth-oriented sectors have pulled back after a strong start to the year.  There has been quite a bit of variation in performance between sectors over the past year.

Domestic Equity Factors

Versant Domestic Equity

Commentary

Growth Facing Headwinds- In April, value and growth were flat in the large cap space, Small cap value companies outperformed small cap growth stocks. Growth-oriented firms are still up in 2018, but may face headwinds if technology firms continue to face heightened pressure from investors and the current administration.

Foreign Equity Factors

Versant Global Growth Foreign

Commentary

Value Shines– In the international developed markets, value outperformed growth for the month. Momentum posted a gain of 1.73%. The size premium in the Emerging Markets was positive in April and for the year.

Liquidity Providers

Versant Liquidity Providers

Commentary

Inflation Steadily Rising– Money market fund and T-Bill yields still trail the CPI, but savers may benefit more as the Fed continues to raise rates. The CPI increased by 0.63% through the end of March and increased 2.36% year over year. Increased trade tensions could bring more inflation to the U.S.

Disinflationary / Deflationary Hedges

Versant Disinflationary Hedges

Commentary

Catastrophe Bonds Provide Stability– The returns of deflationary hedges were mostly negative in April. High yield and catastrophe bonds had the highest returns of 0.67% and 0.65%, respectively. Longer duration bonds underperformed while credit risk was rewarded. Traditional fixed income still face headwinds as central banks continue to tighten.

Inflation-Sensitive Investments

Inflation Sensitive Investments

Commentary

MLPs Recoup Losses– Inflation-sensitive investment returns were mostly higher in April. The Bloomberg Commodity Index and the Alerian MLP recorded gains of 8.09% and 6.09%, respectively. Crude oil and natural gas were down for the month. Gold was flat. Unexpected inflation is still a risk as the U.S. is in the later stages of the business cycle and past quantitative easing by the major central banks has yet to produce many consequences.

World Currencies

Versant World Currencies

Commentary

U.S. Dollar Appreciates– Over the past three months, the U.S. Dollar appreciated against most other major currencies. The Australian Dollar and Swiss France dropped the most relative to the U.S. Dollar. Over the past year, the Euro and Chinese Yuan have strengthened greatly against the U.S. Dollar.

Brandon Yee, CFA, CAIA – Research Analyst

Brandon conducts investment due diligence for Versant Capital Management, and designs and implements tools and processes to support the firm’s research. His background in biology and finance help him to look at challenges from multiple angles, resulting in unique and well-rounded approaches and solutions.

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