November 6, 2017 – Weekly Market Commentary



 

Federal Reserve Crest

Ana Swanson and Binyamin Appelbaum – The New York Times
Trump Announces Jerome Powell as New Fed Chairman

Summary: President Trump nominated Jerome Powell to the chair of the Federal Reserve. Powell is expected to stay the course on monetary policy and expected rate hikes. Powell has been on the Fed’s board of governors since 2012 and has consistently voted in agreement with current Fed chair Janet Yellen. 

 

European Central Bank Logo

David Milliken and William Schomberg – Reuters
Bank of England Raises Interest Rates for First Time in a Decade

Summary: The Bank of England voted to raise its key rate from 0.25% to 0.50%. It was the first rate hike since 2007. Bank Governor Mark Carney said that the rate hike was essential in order to get inflation back to the bank’s target. The hike is seen by some as a gamble given the expected economic pullback from the Brexit in 2018 and beyond. 

 

United States Flag

Anna Edgerton, Erik Wasson, Sahil Kapur, and Laura Davidson – Bloomberg Politics
Five Big Sticking Points in the Republican Tax Plan

Summary: House Republicans are already voicing their concerns with the most recent tax bill. The biggest sticking points in the draft include state and local taxes, mortgage interest deductions, pass-through restrictions, interest deductibility, and ‘backdoor BAT’ which would tax payments that US companies make to offshore affiliates. 

 

Spain Flag

BBC news
Spain Issues Warrant for Puigdemont

Summary: A Spanish judge issued an arrest warrant for Catalan leader Carles Puigdemont and four of his allies who fled to Belgium following the region’s declaration of independence from Spain. No other country has recognized the declaration, and the Spanish central government has taken control of the government in Catalan. 

 

Office Building

Jeff Cox – CNBC 
US Created 261,000 Jobs in October vs 310,000 Jobs Expected

Summary: Job creation in October was below expectations, but the data indicated that the labor market remains strong. The jobs report, along with other recent signs of economic strength should be enough to convince the Fed to raise rates in December. The lack of wage growth means that inflation is likely to remain low which should lead to more of the same economic environment for equity markets.  

 

BlackRock Logo

Russ Koesterich, CFA – BlackRock
Interest Rates: Not Going Back to ‘Normal’ Anytime Soon

Summary: Despite improvements in economic data Koesterich expects interest rates to remain lower for longer. One of the main reasons is current demographics. The aging population will likely lead to lower nominal GDP and a decline in overall household borrowing. Growth will need to stabilize above 2.5% and inflation will need to rise before interest rates can make it back to “normal” levels. 

 

Charles Schwab Logo

Liz Ann Sonders – Charles Schwab
One Things Leads to Another: Productivity’s Rebound

Summary: The current expansion has occurred during the weakest era of productivity with the exception of the late 1970s. Sonders points out that the recent productivity slowdown may be a “statistical illusion” created by rapid technological change. Businesses such as online services could be underestimated in GDP and productivity statistics. Productivity has begun to rebound this year, and signs of stable GDP growth and a tightening labor market should continue to support productivity growth this year. 

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