July 3, 2017 – Weekly Market Commentary



 

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Dave Shellock – Financial Times
Euro and Bund Yields Jump After Draghi Comments

Summary: Bonds sold off globally following upbeat remarks from ECB President Mario Draghi. Draghi’s comments fueled speculation that the ECB will taper asset purchases and become less accommodative in 2018. Analysts are now expecting more hawkish global central bank activity in the second half of the year which would send interest rates higher and likely cause a slowdown in equity markets. 

 

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Susan Cornwall and Richard Cowan – Reuters
Facing Revolt on Healthcare Bill, U.S. Senate Republicans Delay Vote

Summary: Senate Republican leaders postponed a vote on a healthcare overhaul after encountering resistance from 9 Republican leaders. The party can only afford to lose 2 votes from their own ranks. The Senate returns to work on July 10th and will have 3 weeks to pass the bill and send it to the House before lawmakers take a month-long August recess. 

 

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Tim Worstall – Forbes
IMF Cuts US GDP Growth Estimates

Summary: The IMF cut its outlook for the US economy based on expectations that President Trump’s plans to cut taxes and boost infrastructure spending will not affect the economy in the near future. The amount of policy uncertainties led the IMF to remove all macroeconomic growth expectations based on tax reform and fiscal stimulus. The IMF estimates US GDP growth at 2.1% for 2017 and 2018, down from 2.3% and 2.5%, respectively.

 

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James Masters – CNN
Northern Ireland Party Agrees to Prop Up May’s UK Government

Summary: British Prime Minister Theresa May secured a parliamentary majority after agreeing to a 1 billion euro stimulus deal with the 10 members from Northern Ireland’s Democratic Unionist Party (DUP). Under the agreement the DUP will back May’s minority government and bills related to national security and the Brexit. 

 

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Joe Ciolli – Business Insider
The Stock Market is Sending Janet Yellen a Crucial Message

Summary: If the markets were reacting to the Fed’s assertion that they will continue to raise rates, then investors should be selling bond proxy stocks. Recent capital flows show that the opposite is happening. Flows into bond proxy sectors indicate that investors expect interest rates to remain low. Fed Chair Janet Yellen has taken a more hawkish tone lately, standing firm in her assertion that the US economy is strong enough to withstand higher interest rates.   

 

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Sam Forgione – Reuters
Dollar Posts Biggest Quarterly Drop in Nearly Seven Years

Summary: The US dollar posted its biggest quarterly decline against a basket of global currencies in nearly seven years after hawkish signals from foreign central banks. Expectations for tighter monetary policy from the European Central Bank, Bank of England, and Bank of Canada and doubts that Trump will be able to enact his pro-growth agenda make the dollar less attractive. 

 

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Libby Cantrill – PIMCO
What the Latest Healthcare Hiccup Means for the U.S. Economy

Summary: The complexity of healthcare and the divisions within the Republican party make it unlikely that a healthcare bill will be passed soon. Cantrill points out that investors looking for economic boosts from Congress shouldn’t hold their breath. After healthcare is finalized, Washington will likely focus on tax reform, another complex policy. The last time comprehensive tax reform was completed it took almost three years to enact. It is looking increasingly likely that any economic boost from policy changes will not come until 2018 and beyond. 

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