June 5, 2017 – Weekly Market Commentary



 

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Patrick McGee – Financial Times
Draghi ‘Firmly Convinced’ of Need to Stick with QE

Summary:
European Central Bank President, Mario Draghi, says that an extraordinary amount of monetary policy support is still necessary in order to restore stable inflation even as the euro area economy accelerates. Draghi remains optimistic and stresses that the downside risks to the growth outlook are further diminishing but wage and inflation pressures are still too weak.

 

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Akin Oyedele – Business Insider
Jobs Miss Big, Unemployment rate falls to 16-year low 

Summary:
The pace of job creation in the US slowed by more than expected in May. The economy added 138,000 jobs and the unemployment rate fell to 4.3% versus the predicted 182,000 jobs and an unemployment rate of 4.4%. Retail trade lost 6,100 jobs and up to 3,500 stores are expected to close this year as more consumers choose to shop online. Wage growth remained steady at 2.5% year over year growth.

 

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John Gittelsohn – Bloomberg
Larry Fink Says Europe Has Brighter Economic Outlook than U.S. 
Summary:
Fink, CEO of the world’s largest asset manager, believes that signs are pointing to a lackluster U.S. second-quarter GDP, and that Europe may grow faster because of Trump policy uncertainty. Trump’s pro-corporate tax reforms and infrastructure spending have not materialized and until CEOs see more certainty from the Trump administration, they are unlikely to step up investing. Fink predicts U.S. growth in the mid 2% range will not happen, while Europe will likely grow closer to 2.5% this year.
 

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Nouriel Roubini – Roubini Macro Associates
The Global Recovery’s Downside Risks
Summary:
Roubini points out that the global recovery has swung between long periods of growth and rapid periods of deceleration. Currently, the global economic landscape seems stable and activity is accelerating. Investors have absorbed risks, but Roubini says that the lack of policy action from Washington and geopolitical risks will become more pronounced and harder to stomach. The future of the recovery will likely depend on whether or not policymakers can avoid mistakes that will derail the global economy.
 

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Richard Turnill – Blackrock
Equity Strength in Numbers

Summary:
Turnill believes that the rally in the global stock market will continue. There is a strong potential for further gains because of the broad-based nature of the current rally, not just in the US but in Europe and Emerging Markets as well. The breadth of strong economic and earnings performances create a foundation for future equity growth.

 

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Jeffrey Kleintop – Charles Schwab
The Long Period of Underperformance for Emerging Market Stocks May Finally Be Over

Summary:
The end of the long period of emerging market stocks’ underperformance is supported by a recent change in trends for four major market drivers: global & domestic economic growth, currency movements, and commodity prices. As these trends enter a positive phase, emerging market stocks are poised to perform well. Potential risks including the rebound of the US dollar, the decline in China and any related decline in commodity prices which can halt the potential growth for emerging markets. Risks in China are likely only temporary as policymakers would take action to return the economy to a stable 6.5% growth trajectory.

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