January 22, 2018 – Weekly Market Commentary



 

Capitol Hill - Market Commentary

The New York Times
Stopgap Bill to End Government Shutdown Passes Congress

Summary: The Senate voted to reopen the government after 81 senators broke a filibuster. The bill then moved to the House which passed the short-term spending bill. President Trump is not expected to sign the bill and end the shutdown. The bill will keep the government operating through February 8th. 

 

Bank of Canada - Market Commentary

Andrea Hopkins, Leah Schnurr – Reuters
Bank of Canada Hikes Rates, Takes Dovish Tone Amid NAFTA Clouds

Summary: As expected the Bank of Canada raised interest rates 0.25% to 1.25%. Policy makers cited firmer inflation and job growth as their strongest reasons for the hike. The Bank expects to continue raising rates at a gradual pace but could revise its policies if NAFTA termination becomes a plausible outcome.  

 

Washington D.C. - Market Commentary

Ryan Vlastelica – MarketWatch
This is What Happens in the Stock Market When the Government Shuts Down

Summary: Investors may not need to worry too much about a government shut down. Historical data shows that past shutdowns have not corresponded with significant market selloffs. The S&P 500 fell an average of 0.6% during previous closures and the largest pullback was just 4.4% in 1979.

 

Factset Logo - Market Commentary

Akin Oyedele – Business Insider
Flood of Fixed Income Supply Poses Risk to Markets

Summary: The Treasury Department is planning to increase its bond issuance as government funding needs rise. Demand for Treasuries had been supported by central bank purchases, but the end of QE means that the government is expecting investors to pick up the slack. The risk is that investors will not keep up with issuances which would cause long-dated rates to rise and widen credit spreads which generally leads to a pullback in stocks. 

 

PIMCO Logo - Market Commentary

Natasha Turak – CNBC
Oil and Gas MLPs: Poised for a Rebound in 2018

Summary: A renewed focus on increasing free cash flow along with a robust US production outlook supports a rebound in MLP companies. Investor sentiment hit new lows in 2017, but the factors that drove the negative outlook on the industry appear to be transitory. Additionally, tax reforms will be a net positive for investors and operators because of the new rules regarding pass-through income. 

 

Charles Schwab Logo - Market Commentary

Kathy Jones – Charles Schwab
Monetary Tightening and Inflation Could Wake the Bond Bears

Summary: Fixed income investors appear complacent to fundamental shifts in the bond market. Jones says that the Fed’s plan to shrink its balance sheet, along with strong economic growth pushing up inflation, will lead to higher interest rates. With all signs pointing to higher interest rates, it is likely that fixed income returns will be driven by the income generated by bonds rather than price appreciation. 

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