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By Tom Roseen In December the U.S. market took investors on a wild ride. Toward month-end the Dow Jones Industrial Average and the S&P 500 Index posted their thirty-eighth and fifty-second record closes for the year, respectively. A strong nonfarm payroll report at the beginning of the month pushed up U.S. equity markets, and the Dow flirted with the 18,000 mark for the first time. However, concerns about the health of the global economy the following week fueled one of the largest one-week drops in two and half years and sent the VIX to its highest level since October 17. Investors shrugged off a better-than-expected consumer sentiment report and focused on volatility in oil prices and the possibility of the global economy succumbing to deflation. Despite a Federal Reserve-fueled Santa Claus rally toward month-end, U.S. stocks finished the good year on a down note, with the Dow witnessing a triple-digit loss on the last trading day of the month. Both equity and fixed income CEFs posted negative NAV-based returns (-1.43% and -0.24% on average, respectively) for the first month in three, while market-based returns were also in the red for both equity CEFs (-2.51%) and fixed income CEFs (-0.02%). Treasury yields declined at all maturities ten-years or greater in December, with the twenty-year yield declining the most, 15 bps to 2.47% at month-end. The rising dollar and slowing growth overseas made U.S. Treasuries more attractive to foreign investors. The Treasury yield curve rose in most of the lower-dated maturities, with the three-year rising the most-22 bps to 1.10%-by month-end. The one-month yield witnessed a small decline, dropping 1 bp to 0.03%. For December the dollar once again gained against the euro (+2.69%), the pound (+0.32%), and the yen (+0.88%). Commodities prices were mixed, with near-month gold prices rising 0.73% to close the month at $1,184.10/ounce. Meanwhile, front-month crude oil prices plunged a whopping 19.60% to close the month at $53.27/barrel. That equated to a quarterly decline of 40.41% and a one-year decline of 45.87%. For the month 47% of all CEFs posted NAV-basis returns in the black, with 33% of equity CEFs and 58% of fixed income CEFs chalking up returns in the plus column. The slide in oil prices and concerns over Greece’s inability to elect a favored presidential candidate, rekindling fears of another European crisis, weighed on Lipper’s World Equity CEFs macro-classification (-2.43%), pushing it to the bottom of the equity CEF universe. On the equity side (for the fourth consecutive month) mixed-asset CEFs (-0.73%) mitigated losses better than the other macro-groups, followed by domestic equity CEFs (-1.15%). Once again, the municipal bond CEFs group (+1.13%) was the only fixed income macro-classification posting a return on the plus-side for the month, with all of its classifications experiencing returns in the black. The muni CEFs group was followed by domestic taxable bond CEFs (-1.47%) and world bond CEFs (-4.17%). For December the median discount of all CEFs widened just 19 bps to 9.28%-deeper than the 12-month moving average discount (8.55%). Equity CEFs’ median discount widened 115 bps to 9.46%, while fixed income CEFs’ median discount narrowed 53 bps to 9.13%. To read the complete Month in Closed-End Funds: December 2014 FundMarket Insight Report, which includes the month’s closed-end fund corporate events, please click here . Scalper1 News
Scalper1 News