Market Cheat Sheet Feb. 3, 2019

Market Cheat Sheet

“China’s economic expansion languished to its slowest pace in nearly three decades last year, as a bruising trade fight with the U.S. exacerbated weakness in the world’s second-largest economy. The 6.6% growth rate for 2018 reported Monday is the slowest annual pace China has recorded since 1990. The economic downturn, which has been sharper than Beijing expected, deepened in the last months of 2018, with fourth quarter growth rising 6.4% from a year earlier.” – WSJ

“MLPs are trading at valuation multiples last seen during the 2008 financial crisis despite midstream companies having lower leverage, stronger distribution coverage, simplified corporate structures, and a constructive fundamental backdrop… since inception of the AMZ, the index has returned an average of 33.3% in rising rate environments, while returning an average of -8.3% in falling rate environments… We believe there is a case for multiple expansion as evidenced by DCF/unit and EPS growth, which are expected to experience respective annual growth of 6.7% and 7.5% from 2019 through 2021” – GSAM Energy & Infrastructure Team

“Assets in money-market funds, which are generally used as a proxy for net new cash flows, have grown by more than $2 billion this month, according to Lipper data through Thursday. That comes on top of the $190 billion investors added to the funds in the final three months of last year, their biggest deposit since 2008. The moves are pushing up cash allocations in investment portfolios for the first time since 2011, with investors’ exposure rising off their lowest levels ever, according to a Goldman Sachs analysis. That could herald further volatility; the broad S&P 500 index tends to fall in years when cash allocations rise, according to Goldman data going back to 1952.” – WSJ

“Lance Milken, the son of one-time “junk bond king” Michael Milken, has departed Apollo Global Management, the private equity group that was founded by former colleagues of his father, to set up a family office. The younger Mr. Milken, 43, was a senior partner at Apollo in its core private equity business, which manages $72bn. A Wharton School graduate like his father, Mr. Milken joined Apollo in 1998 as a junior investor. His emphasis at the firm has been on the consumer sector, where he was involved in several large restaurant chain deals.” – FT

“Some of Wall Street’s biggest investors are sitting on a paper windfall this year as the government ratchets up a debate over the future of mortgage-finance giants Fannie Mae and Freddie Mac. The increased rhetoric has so far led to a surge in the companies’ shares and paper profits for their investors, including mutual-fund giant Capital Group Cos. and hedge funds Discovery Capital Management LLC, Blackstone Group ’s GSO Capital Partners LP, Paulson & Co., Perry Capital and Pershing Square Capital Management LP, said people familiar with the matter… The common shares of Fannie and Freddie are up more than 170% this year, while the most commonly traded class of the preferred shares, a form of senior equity that used to pay a dividend, are up more than 37%.” – WSJ

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