Weekly Market Update: September 16, 2019

Top Three Market Headlines

ECB Resumes Monetary Easing: The European Central Bank (ECB) last week reembraced a package of monetary stimulus measures in an effort to protect the Eurozone economy from a global growth slowdown. Specifically, the ECB said it would cut its key interest rate by 0.1%, leaving it at -0.5%, while also restarting its bond purchasing, or quantitative easing (QE), program that only recently ended in December 2018. The new QE program, under which the ECB will buy €20 billion a month of Eurozone bonds, is expected to start in November and last “as long as necessary.” The ECB also promised not to raise interest rates until its inflation outlook converges towards its target of just below 2%. 

Corporations Rush to Raise Capital: Capitalizing on low interest rates and healthy investor demand, American companies are rushing to raise both debt and equity capital in the public securities markets. Approximately 70 companies have filed with the Securities and Exchange Commission to issue initial public offerings (IPOs), while last week alone $72 billion in investment-grade corporate debt was issued, almost matching the total issuance in the month of August. With 30-year Treasury yields at record lows, companies are looking to lock in historically low borrowing costs while investors seek yield.  Even cash flush companies such as Apple, Walt Disney Co. and Coca-Cola have sold notes recently to take advantage of interest savings.  

Value Stocks Enjoy a Rebound: After a protracted period of underperformance, so-called value stocks—i.e., those exhibiting cheaper valuations—have enjoyed a rebound in the month of September. With a 2.5% gain last week, the Russell 1000 Value Index has produced a 4.5% return month-to-date, outperforming the 1.1% return for the Russell 1000 Growth Index over the same period. Value stocks have particularly shone in the small cap segment of the market, with the Russell 2000 Value exhibiting a 8.0% return in September versus 3.4% for the Russell 2000 Growth Index. Whether this reversal represents the start of a longer trend is yet to be seen, but it is surely welcomed by beleagured value stock managers that have struggled to keep up with their growth stock counterparts in recent years.   

Data Points

• The ECB cut its benchmark interest rate by 0.1%, its first cut since March 2016
• American companies issued $72 billion in investment-grade corporate debt last week
• The Russell 1000 Value Index has outperformed the Russell 1000 Growth Index by 340 basis points in September 

WSJ 9/12/2019; Reuters 9/11/2019; Barrons 9/9/2019 . Data from Morningstar Direct. Returns for periods greater than one year are annualized. Investment advisory, named and independent fiduciary services are offered through Gallagher Fiduciary Advisors, LLC, an SEC Registered Investment Adviser. Gallagher Fiduciary Advisors, LLC does not express an investment opinion regarding any specific commodity, sector or individual security. Unless otherwise expressly noted, the contents of this communication do not constitute securities or investment advice, nor should this communication be construed as an opinion regarding the appropriateness of any investment. Gallagher Fiduciary Advisors, LLC is a single-member, limited-liability company, with Gallagher Benefit Services, Inc. as its single member. Neither Arthur J. Gallagher & Co., Gallagher Fiduciary Advisors, LLC nor their affiliates provide accounting, legal or tax advice. The information provided cannot take into account all the various factors that may affect your particular situation, therefore you should consult your Gallagher Fiduciary Advisors consultant before acting upon any information or recommendation contained herein to discuss the suitability of the information/recommendation for your specific situation.