March 5, 2018 – Weekly Market Commentary



 

American Flag - Market Commentary

Ana Swanson – NY Times
Trump to Impose Sweeping Steel and Aluminum Tariffs

Summary: President Trump said he would impose stiff tariffs on steel and aluminum. The tariffs would be 25% on steel and 10% on aluminum which would apply to every import of those metals. Stocks took a dip in response to the news, with particular declines in the industrial sector. Discussions are still taking place regarding the entire nature of the tariffs, their levels, and applications. Tariffs like this are seen as a fulfilment of Trump’s campaign promises, but many analysts say trade wars will ensue. Gary Cohn and Jim Mattis, top officials of the administration reportedly tried to stop the tariffs. Ongoing arguments on both sides of the coin continue to heat up as talks move forward. 

 

US Federal Reserve Logo - Market Commentary

Howard Schneider & Jason Lange – Reuters
Fed’s Powell Nods to Stronger Economy, Backs Gradual Rate Hike Path

Summary: Fed Chairman Jerome Powell, in his first public appearance as head of the central bank, indicated he will be continuing on the path the fed has been planning. The goal is to prevent the economy from overheating while implementing gradual rate hikes. The fed is expected to pursue its first rate hike of the year at its next meeting in March as Powell aims to strike a balance between inflation and growth. 

 

China Flag - Market Commentary

James Griffiths & Tim Schwarz – CNN
China to Drop Presidential Term Limit, Paving Way for Xi Jinping to Remain in Power

Summary: China’s Communist Party (CCP) proposed amending the constitution to allow Xi Jinping to remain in power indefinitely. Typically, the Chinese president serves two terms in office, Jinping is nearing the end of his second and has forgone establishing a successor. Additionally, the CCP proposed adding “Xi Jinping thought” to the constitution, alongside Marxist and Zedong thought as guiding principles of the nation.

 

Euro Bills - Market Commentary

Reuters Staff
Eurozone Inflation Slows, Underlining ECB Caution

Summary: Eurozone inflation hit a 14-month low ahead of the European Central Bank’s upcoming meeting. The data could make the ECB more cautious about tapering back its asset purchases this year. Wage growth and low unemployment are expected to put upward pressure on inflation, but a strengthening euro could limit the upside over the short-term.  

 

The Washington Post Logo - Market Commentary

Deborah Ball & Giovanni Legorano – WSJ
Italian Populists Declare New Epoch After Election Victory

Summary: The populist Five Star Movement and the League party claimed victory in this weekend’s Italian elections. The vote all but guarantees an anti-establishment leader for Italy. Neither party achieved enough of a majority to take over the government directly. Current President Sergio Mattarella will choose which party gets the first opportunity to form a coalition and take power over parliament. 

 

Schwab Logo - Market Commentary

Jeffrey Kleintop – Charles Schwab
Trade War and Peace: Which Markets Are Most At Risk

Summary: Kleintop says that the proposed metals tariffs will only have a small economic impact domestically, but investors are concerned that there will be more announcements to come which could lead to a global trade war. Emerging markets are likely the equity class that has the most to lose from a trade war. Historically, the performance of emerging market stocks has been more sensitive to changes in global trade. 

 

BlackRock Logo - Market Commentary

Isabelle Mateos y Lago – BlackRock
Market Implications of the Italian Election

Summary: The Italian elections resulted in a hung parliament with two populist parties gaining ground but no majority. The BlackRock team believes that the results may put pressure on Italian and other peripheral country bonds, but the European equity markets are unlikely to see any sustained negative effects. While the new government is likely to take a confrontational stance against the European Union, BlackRock expects that the Italian parliament will initially focus on rolling back domestic reforms before taking on the EU. 

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