July 17, 2017 – Weekly Market Commentary



 

Bloomberg Markets Logo

Thomas Petty and Charlotte Ryan – Bloomberg
Brexit’s Repeal Bill No Longer “Great” but VitalSummary: The Repeal Bill published by Prime Minister Theresa May’s government on Thursday is a milestone in Britain’s ongoing departure from the European Union. The bill will repeal the European Communities Act of 1972 which gave priority to EU law in the U.K. Follow the link for a breakdown of the challenges the U.K. will face passing and implementing the bill.
 

Bank of Canada

Craig Wong – Financial Post
Bank of Canada Raises Interest Rate for First Time in 7 Years to 0.75%Summary: The Bank of Canada has hiked its benchmark interest rate to 0.75% from 0.5%, its first increase in nearly seven years, amid expectations of stronger economic growth this year. The bank said that economic growth is broadening and becoming more sustainable. Similarly to the US, the Bank of Canada is now raising rates while inflation is running below its 2% target.
 

US Fed Logo

Ben White and Victoria Guida – Politico
Cohn is Trump’s top Candidate to Replace Yellen at FedSummary: President Donald Trump is increasingly unlikely to nominate Federal Reserve Chair Janet Yellen for a second term. National Economic Council Director Gary Cohn is the leading candidate to succeed Yellen as the world’s most important central banker. Cohn would be the first Fed chair in 40 years who is not an economist. His views while working at Goldman Sachs indicate that he would likely follow Yellen’s plans for gradual rate hikes.
 

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Joe Ciolli – Business Insider
Red-Hot Tech Stocks Could be Derailed by the FedSummary: The so-called FAANG group, consisting of Facebook, Apple, Amazon, Netflix, and Google, has traded inversely to 10-year Treasury yields for the better part of the past decade, according to data compiled by Credit Suisse. If the Fed continues to raise interest rates as planned, those high-flying tech stocks are likely to come under pressure. Overcrowding into the FAANG stocks could lead to a rapid reversal if fund managers try to unwind their positions.
 

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Stephen Gandel – Bloomberg Gadfly
Earnings Party Fades on Stock MarketSummary: Second-quarter earnings are expected to increase, but they aren’t likely to rise nearly as much as in the first-quarter. Analysts estimate that profits from April to June rose 6.4% for the companies in the S&P 500 compared with those a year ago, according to FactSet. That would be less than half of the Q1 increase. What’s more, it includes a stratospheric 370% increase in second-quarter profits from energy companies. Removing energy companies from the equation brings expected profit growth to 3.7%.
 

BlackRock Logo

Russ Koesterich, CFA – BlackRock Global Allocation Team
Don’t Fear the Commodity Slump – YetSummary: Koesterich says that the slump in commodity prices is not a sign of economic deceleration. Most of the poor performance in the index has come from oil prices, which are continuing to struggle against supply headwinds. Cyclical commodities, like industrial metals, have performed well this year, which is consistent with improvements in global manufacturing. Tighter central bank conditions will eventually lead to pullbacks, but current financial conditions remain easy and commodity friendly. 

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