August 28, 2017 – Weekly Market Commentary



 

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Joshua Berlinger – CNN
Trump Says ‘all options on table’ After North Korea Launches Missile Over Japan

Summary: North Korea launched a missile over Japan, setting off warnings in the northern part of the country. It was the first time that North Korea has successfully fired a ballistic missile over Japan. President Trump has spoken with Japanese Prime Minister Shinzo Abe and said that “all options are on the table” to manage the situation. Global markets traded down on the news. 

 

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Erik Wasson – Bloomberg Politics
Trump Shutdown Threat Complicates Congress’s Debt Ceiling Plans

Summary: President Trump said that he may veto an increase in the debt ceiling if Congress’s spending plan does not include funds for a southern US border wall. Congress needs to pass a spending measure by September 30th to avoid a partial government shutdown. The markets will be watching because any spending measure will have implications on how tax reform will be handled. 

 

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Evelyn Cheng – CNBC
ECB’s Draghi Says Global Recovery is Firming Up, Euro Climbs

Summary: European Central Bank President Mario Draghi said that he believes the global recovery is improving but warned about challenges to future growth. The euro spiked to its highest level against the US dollar since January 2015 on his comments. Despite some speculation, Mr. Draghi gave no indication as to when the ECB might taper its bond purchase program. 

 

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Josh Zumbrun – Fox Business
Global Economies Grow in Sync

Summary: For the first time in a decade the world’s major economies are growing in sync. All 45 countries tracked by the Organization for Economic Cooperation and Development are on track to expand this year. Global economic output is now projected to grow 3.5% in 2017, up from 3.2% in 2016. 

 

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Lucia Mutikani – Reuters
U.S. New Home Sales Hit Seven-Month Low as Prices Soar

Summary: New home sales fell unexpectedly amid a surge in prices. The data raises concerns of a slowdown in the housing market recovery. Residential spending and investment are now trending below Q2 levels. The median price of a new home rose 6.3% year over year to $313,700.

 

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Michelle Fox – CNBC
Mohamed El-Erian: The Market Will Worry About Debt-Ceiling Fight

Summary: Allianz’s Chief Economic Adviser Mohamed El-Erian believes that a government shutdown or a debt ceiling will “be dealt with”, but that investors are more worried that these issues will delay tax and infrastructure reform. Any delays on those fronts could lead to a decline in investor confidence.  

 

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Kathy Jones – Chief Fixed Income Strategist
What’s the Bigger Risk: Bond Market Bubble or Complacency?

Summary: Bond yields are starting to move up from historical lows, but chances are slim that interest rates will spike. Slow growth, low inflation, and strong investor demand are likely to limit increases in yields. Jones’ biggest concern is that the markets are not anticipating the potential for tighter monetary policy or higher inflation. Complacency in regards to rate hikes has led to high valuations in riskier parts of bond markets. Jones recommends reducing portfolio average duration or using bond ladders to spread out maturities and mitigate risk. 

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