Fifth Third Private Bank
May 2018
Financial Market Roundup
Produced by Fifth Third's Investment Management Group
In the following piece, Fifth Third's Investment Management Group recaps the market and how it reacted to various events in the month of April.
Global Trends Trending Neutral
Global Trends

The U.S. dollar posted its best monthly performance since November 2016 against a basket of major currencies after falling for five straight quarters. Oil prices rallied in April, amid the prospect of re-imposition of U.S. sanctions on Iran’s oil sales. West Texas Intermediate crude rose 5.59 percent in April to $68.57 a barrel. Concern around inflationary risks heightened, pressuring global bond prices as investors acknowledged a faster pace of economic growth will eventually prompt the removal of stimulus from central banks.
Central Bank Policy Trending Neutral
Central Bank Policy

Global central banks continued to move towards removal of accommodation. The Federal Reserve's Federal Open Market Committee voted to increase the federal funds target range by 25 basis points from 1.50%-1.75% in its March meeting, as expected. The European Central Bank voted to keep policy unchanged and reaffirmed its pledge to move slowly in removing stimulus. The Bank of Japan also left policy settings unchanged and needs greater assurance that it is successfully boosting inflation and real growth before it begins reducing accommodation.
Equity Performance Trending Neutral
Equity Performance

Global equities were mixed in April as concerns around trade tensions remained and first quarter earnings season kicked off. The MSCI All-Country World Index rose 0.96 percent in the month of April, while the S&P 500 Index rose 0.38 percent. Domestic mid-cap shares and emerging market equities posted modest losses for the month, trading down by 0.26 percent and 0.44 percent, respectively. Developed international equities led, gaining 2.28 percent in the month. As of month end, 80 percent of S&P 500 companies that had reported first quarter results posted positive earnings surprises. Adjusted earnings per share were up more than 23 percent from a year earlier, compared to the estimated earnings growth rate of 17.1 percent as of March 31.
Interest Rates And Growth Trending Neutral
Interest Rates And Growth

Yields rose in April, with the benchmark 10-year U.S. Treasury yield rising above 3.00 percent for the first time since 2014, before paring the increase to end the month at 2.95 percent. Preliminary estimates of the U.S. economy's growth rate for the first quarter came in at 2.30 percent, higher than the expected 2.00 percent increase. Personal consumption, the largest part of the economy, rose 1.10 percent, matching estimates.
Political And Regulatory Trends Trending Positive
Political And Regulatory Trends

Tensions eased between the U.S. and China as a full-blown trade war appeared to be an unlikely outcome. European Union leaders pressured President Trump to provide a permanent exemption to steel and aluminum tariffs, or face retaliation. North Korean leader Kim Jong Un and South Korean President Moon Jae-in agreed to end their countries' seven-decade conflict and plan to pursue the complete denuclearization of the peninsula. The two leaders will hold military talks next month and expect to sign a peace treaty by the end of the year.
Investment Trends Trending Neutral
Investment Trends

Geopolitics, trade developments and first quarter earnings dominated investment themes in April. Volatility in equity markets remained, while dollar strength and rising yields caught investor attention. Focus turned away from concerns about a potential trade war to digestion of earnings results, with some reports speculating about whether the first quarter could represent an earnings peak. Economic data in the U.S. was largely positive, with retail sales, housing market data and gross domestic product as a few of the highlights, though the March employment report was mixed.

Market commentary provided by Fifth Third Bank. Source of statistics is Bloomberg.com. Returns are calculated from market close 3/31/18 through 4/30/18. This information is current as of the date of this letter and the opinions expressed are subject to change at any time, based on market and other conditions. This information is intended for educational purposes only and does not constitute the rendering of investment advice or specific recommendations on investment activities and trading. The mention of a specific security within this letter is not intended as a solicitation to buy or sell the specific security. Index performance shown within this letter is not representative of any Fifth Third managed account.

Investing involves risk, including the possible loss of principal invested. Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment loss. Past performance is no guarantee of future results.

Indexes are unmanaged, do not incur investment management fees, do not represent the performance of any particular investment, and may not be invested directly into by investors. Small company investing involves specific risks not necessarily encountered in large company investing such as increased volatility. Investments in foreign markets entail special risks such as currency, political, economic and market risks.

Consumer Price Index (CPI) – measures changes in the price level of a market basket of consumer goods and services purchased by households.

DJIA/DOW – the Dow Jones Industrial Average is a price weighted average of 30 blue-chip stocks that are generally the leaders in their industry.

Fed – The Federal Reserve System (FRS) is the central bank of the United States and is commonly known as “The Fed”. It regulates the U.S. monetary and financial system. The Fed's mandate is to promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar and moderate long-term interest rates.

Federal Funds Rate (Fed Funds) – The interest rate at which depository institutions actively trade balances held at the Federal Reserve.

FOMC – The Federal Open Market Committee is the policy-making branch of the Federal Reserve that reviews economic and financial conditions and determines an appropriate stance of monetary policy by setting a target for the federal funds rate. GDP – Gross domestic product is the market value of the goods and services produced by labor and property located in the United States.

GDP – Gross domestic product is the market value of the goods and services produced by labor and property located in the United States.

Gold Index – is the U.S. dollar per Troy ounce.

MSCI All Country World Index (ACWI) – is a market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. It is comprised of stocks from both developed and emerging markets.

MSCI EMF (Emerging Markets Free) Index – is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. As of June 2006 the MSCI Emerging Markets Index consisted of the following 25 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

MSCI US REIT Index – is a free float- adjusted market capitalization weighted index that is comprised of equity REITs that are included in the MSCI US Investable Market 2500 Index, with the exception of specialty equity REITs that do not generate a majority of their revenue and income from real estate rental and leasing operations. The index represents approximately 85% of the US REIT universe.

MSCI World Index – is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of the following 24 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,Sweden, Switzerland, the United Kingdom, and the United States.

Nasdaq 100 Stock Index – is a modified capitalization-weighted index of the 100 largest and most active non-financial domestic and international issues listed on the NASDAQ. No security can have more than a 24 percent weighting.

Oil ($ barrel)/WTI – Bloomberg USCRWTIC Index representing West Texas Intermediate (WTI) Cushing Crude Oil Spot Price.

Organization of Petroleum Exporting Countries (OPEC) – is a group consisting of 12 of the world's major oil-exporting nations. OPEC aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.

S&P 500 Index – The Standard and Poor’s 500 index is a capitalization weighted index of 500 benchmark stocks and is often used as a measure of the overall U.S. stock market.

US Treasury – A debt obligation backed by the U.S. government with a fixed interest rate and a maturity between one and 10 years.

Unemployment Rate – The unemployment rate tracks the number of unemployed persons as a percentage of the labor force (the total number of employed plus unemployed).

VIX Index – The Chicago Board Options Exchange Volatility Index reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide rate of strikes.

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