May 7, 2018 – Weekly Market Commentary



 

Donna Borak – CNN Money
Fed Leaves Rates Unchanged and Says Inflation is Moving Higher

Summary: The Fed left interest rates unchanged and signaled that inflation is nearing their stated goal. Members agreed that the economy remained strong and that they are on track to continue raising interest rates this year. The Fed has raised rates 6 times since 2015 and is trying to maintain the delicate balance of raising rates at a pace that does not cause an economic pullback. 

 

Jeff Cox – CNBC
Nonfarm Payrolls Increased by 164,000 in April vs 192,000 Expected

Summary: Payrolls increased by 164,000 and the unemployment rate fell to 3.9%, an 18-year low in April. Jobs growth and wage growth both missed economists’ expectations, but wage growth remained well above inflation at 2.6%. The report had few surprises which means that the Fed should remain on track with future interest rate hikes. 

 

Euro Bills - Waterloo Capital Weekly Market Commentary

Claire Jones – Financial Times
Eurozone Growth Hits Slowest Pace in 18-Months

Summary: Disappointing data showed that the eurozone economy is once again struggling to gain momentum. The region grew just 0.4% during Q1 2018. Economists have identified a slowdown in production and exports as the largest detractors during the quarter. 

 

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Liz McCormick – Bloomberg 
Breakdown of Stock-Bonds Link

Summary: Over the past decade, stock prices and bond yields have been positively correlated. So far this year that has not been the case and many investors have struggled to find places to allocate capital. Equity markets have been trending sideways, and because bond prices fall as yields rise bond investors have been seeing losses as well. PIMCO’s CIO says that rising inflation expectations are the likely culprit. 

 

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Mark Raskopf – Russell Investments
What’s Behind the Recent Commodity Rally?

Summary: Commodities have quietly been in an uptrend in recent months. Industrial metals prices have been rising due to the fallout from US sanctions against Russia which is a large supplier of nickel and palladium. Oil price gains have been supported by Middle East tensions and early signs that US production may be slowing due to capacity constraints. US tax reform, a rebound in Chinese growth, and a weaker US dollar are all expected to continue supporting commodity prices going forward. 

 

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Russ Koesterich, CFA
It’s All About The Multiples

Summary: Earnings have been beating lofty expectations but the market hasn’t been able to maintain momentum. Positive earnings results are likely being outweighed by stretched valuations and tightening financial conditions. As multiples contract, investors have been less willing to pay more for earnings which has led to a slowdown in price appreciation. Additionally, higher volatility and rising interest rates make high valuations less attractive. 

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