This Weekly Market Update reviews the top three market headlines; IPOs Boom in 2020, Industrial Metal Prices Soar Alongside Economic Recovery, Inflation-Adjusted Corporate Bond Yields Fall Below Zero

Data Points

Top Three Market Headlines

IPOs Boom in 2020: Fueled by a surging stock market and the strong performance of recent technology listings, the initial public offering (“IPO”) market has had a record-breaking year. To date, almost $150 billion has been raised on U.S. exchanges in 2020, surpassing the previous full-year record of $107 billion set in 1999 at the height of the dot-com boom, according to Dealogic. Two high-profile offerings last week, DoorDash and Airbnb, contributed to this record-breaking total, as each offering raised upwards of $3 billion. The fervor for IPO’s was reflected in the price spikes for each of the two companies on their first day of trading: DoorDash closed up 86% from its offering price, while Airbnb doubled.

Industrial Metal Prices Soar Alongside Economic Recovery: Industrial metal prices have risen sharply from pandemic-related lows in late March amid a faster-than-expected economic recovery. Copper prices last week recently reached their highest level in eight years, while iron ore has been one of the best-performing assets of 2020. Other industrial metals, such as aluminum and zinc, have also increased over 40% since mid-May. Accelerating manufacturing activity in the U.S. and China has supported the rise―China, in fact, accounts for approximately half of the global demand for copper. On the supply side, closed mines from the pandemic and labor strikes have added to the upward price pressures.

Inflation-Adjusted Corporate Bond Yields Fall Below Zero: Last week the average inflation-adjusted (aka “real”) yield on investment-grade corporate bonds fell below zero for the first time ever (based on records going back to 2003). According to the Federal Reserve Bank of St. Louis, the annual expected inflation rate reached 1.89% last week, while the yield on the Bloomberg Barclays U.S. Corporate Investment Grade Index sunk to 1.85%. Corporate bond yield have fallen dramatically since late March as the Federal Reserve has kept Treasury interest rates at rock-bottom levels while strong investor demand for yield has squeezed the spread of corporate bond yields relative to those of Treasuries.

 
As of December 11, 2020
Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World -0.50% 11.69% 13.22% 16.80%
S&P 500 -0.95% 9.30% 15.39% 18.78%
Russell 2000 1.03% 27.06% 16.02% 18.79%
MSCI EAFE -0.51% 12.88% 4.87% 7.76%
MSCI Emerging Markets 0.54% 16.39% 15.03% 21.46%
FTSE NAREIT -2.51% 9.08% -10.06% -8.74%
Bloomberg Commodity 0.77% 5.69% -7.08% -3.97%
Barclays U.S. Aggregate 0.35% 0.39% 7.21% 7.01%

WSJ 12/07/2020, Bloomberg 12/10/2020, WSJ 12/10/2020, WSJ 12/06/2020. 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.