Q4 2019 PSN Top Guns – Markets Cap Off 2019 With a Bang

A stellar 2019 finished with a bang as the geopolitical risks that dominated headlines and markets for the better part of 2019 diminished during the fourth quarter while economic data remained stable. The S&P 500 index posted a +9.07% return during the quarter as a phase one trade agreement between the U.S. and China provided a boost for global markets and increased investor optimism. Furthermore, the MSCI EAFE index posted an +8.21% return during the quarter as global investors cheered the trade agreement while hoping the easing trade tensions will provide relief to the soft global economy. Despite a 25-basis point interest rate cut by the Federal Reserve (Fed), the improved investor sentiment hurt Treasuries, as the BofA Merrill Lynch US Treasury index returned -0.89% during the quarter.

The technology sector (S&P 500 Information Technology index: +14.40%), which is sensitive to trade headlines, lead the way during the quarter as the easing trade tensions provided a boost for the sector along with strategies with a growth style tilt. Additionally, small cap growth strategies, represented by the Russell 2000 Growth index, benefited in the risk on environment, posting a +11.39% return during the quarter. Below are some of the strategies that make up the PSN Top Guns U.S. Small Cap Growth Universe.

• Princeton Capital Management, Inc.: Young Enterprise Shares (+20.0% for the quarter)
• Granahan Investment Management, Inc.: Small Cap Select Opportunities (+19.9% for the quarter)
• Elk Creek Partners, LLC.: Small Cap Growth (+16.7% for the quarter)

Potentially benefiting most from the trade agreement was the soft Chinese economy, as initial reports showed that the U.S. will suspend tariffs on Chinese goods that were expected to go into effect on December 15th, while rolling back existing tariffs. The reports boosted sentiment for emerging market equities, as the MSCI Emerging Market equity index posted a +11.93% return. The following strategies made the PSN Top Guns list for the Emerging Markets Universe.

• Caravan Capital Management: Caravan Emerging Markets Small Cap (+25.4% for the quarter)
• Global Value Advisors: Emerging Markets (+15.8% for the quarter)
• AllianceBernstein L.P.: AB Emerging Markets Value (+15.5% for the quarter)

The improving sentiment regarding the U.S. economy and the trade agreement placed downward pressure on Treasuries as 10-year yields rose to 1.92%, which also helped steepen the yield curve. The Fed cut interest rates once during the quarter which pushed yields lower on the front end of the curve. However, the Fed signaled that they are halting their rate cuts which supported longer term yields. High yield bonds, measured by the Bloomberg Barclays US High Yield index, returned +2.61% during the quarter as the more optimistic view on the U.S. economy boosted the more speculative debt. Below are some of the strategies that make up the PSN Top Guns High Yield Universe.

• Nuveen Asset Management: High Yield Fixed Income (+3.9% for the quarter)
• Federated Investors, Inc.: Opportunistic High Yield FI Comp (+3.8% for the quarter)
• Barrow, Hanley, Mewhinney & Strauss: High Yield Fixed Income (+3.7% for the quarter)

The complete list of PSN Top Guns, and an overview of the methodology, is located here. If you do not have a login, you may register for complimentary access. For more details on the methodology behind the PSN Top Guns Rankings, or to purchase PSN Top Guns Reports, contact Margaret Tobiasen.