A Look Back At The First Quarter


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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

By JC Parets,

Now that we’re officially in the second quarter of 2014, we can look back at Q1 to see what we’ve learned. The big winners were in the commodity space with the equal-weighted commodies index up over 10% for the first quarter. Coming in second were US Treasury Bonds up almost 8% for the quarter. On the equities side, the Dow Jones Industrial Average struggled losing 1.5% for Q1, the S&P500 closed up 50 basis points and the Small-cap Russell2000 was down 1%.

There were a lot of stock market bulls coming into the new year, but we couldn’t find many bond or commodities bulls. It’s fascinating to see sentiment play itself out. We’re starting to hear more chatter about commodities lately but still not many bond bulls. We’ll see what happens in the second quarter.

Individual sector-wise, I can’t say I’m surprised with the results. Back in February we noticed that the high yielding Utilities and REITs were leading the way for stocks. As interest rates have been falling (while most expected them to rise), fixed income managers need to find yield. They’re not getting it in bonds, so the flow goes into the sectors with the biggest dividends. I don’t think it’s a coincidence that the historically low yielding Cyclicals and Industrials were the worst performers.

4-1-14 sectors q1

In the metals space Palladium was the big winner finishing up the quarter up 8.5%. This was my favorite chart coming into the new year and the price action so far continues to prove why. Copper was a big time loser getting crushed along with emerging markets. Something else that sticks out is the underperformance of Silver in a positive precious metals environment. That calls me to question this quarter’s rally in that space. I would expect (and want) silver to outperform if this was a real bull market:

4-1-14 metals q1

The soft commodities were the big winners for sure. Coffee finished up the quarter up over 60%, after doubling from the Q4 lows. Corn, Wheat and beans all came in with double digit returns and Sugar, Cotton, and Cocoa all finished with solid gains:

4-1-14 softs q1

In Energy we had some mixed returns. West Texas Crude finished up close to 3% with Brent Crude down almost3%. Natural Gas finished up 3% and Heating Oil down 4.5%. Mixed signals out of this space:

4-1-14 energy q1

Going forward what should we expect? I’m not sure that I see anything different than what we saw coming into the new year. I think the price action so far has confirmed a lot of we expected. Rates continue to fall and I don’t see any evidence yet of a rally. Stocks keep struggling with most of the world down this year. The US has been one of the stronger areas within equities and still can’t seem to rally. I would expect more of nothing out them. And in commodities we can continue to pick and choose as the rotation there continues. But as an equal-weighted group, I would expect to keep seeing them outperform.

If the data changes, then we’ll reevaluate. We have our levels, and if any of those are broken, we’ll adjust. But for now, all systems go.


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