Weekly Market Commentary

Oil Pump  - Waterloo Capital Weekly Market Commentary

Amanda Cooper – Reuters
IEA Warns High Crude Prices May Stifle Demand

Summary: Global demand for oil is likely to moderate this year as prices near $80 per barrel. Prices have risen more than 50% over the past year, and importer subsidies in many emerging economies are expected to be reduced or cut this year. Demand could also be moderated by Supply constraints due to geopolitical developments which are likely to keep prices higher over the short-term.

Leaning Tower of Piza - Waterloo Weekly Market Commentary

Jason Horowitz – The New York Times
What Will Italy’s Next Government Do? A Leak Jolts Stocks 

Summary: A leaked document outlining a radical proposal to change Italy’s relationship with the European Union spooked investors in Italian stocks and bonds. Comments from both parties have made investors nervous that the new government will take a protectionist stance that could disrupt relations between the European Union’s core and peripheral countries. 

Price Chart - Waterloo Weekly Market Commentary

Fred Imbert – CNBC
Small-Cap Stocks Quietly Rise to All-Time High

Summary: The Russell 2000 index hit an all-time high last week, quietly recovering from the February correction. Small-cap companies have benefited from largely being on the sidelines of the recent trade tensions and also stand to see a greater boost from recent tax reforms. Companies in the Russell 2000 derive 21% of their revenues from overseas, on average, while S&P 500 companies derive 30% of revenues from outside of the US. 

Japanese Flag - Waterloo Weekly Market Commentary

BBC News
Japan’s Economy Shrinks For First Time in Two Years

Summary: The world’s third-largest economy contracted 0.6% during the first quarter. The contraction was likely due to a decline in demand for exports during the recent trade disputes between the US and China. Economists expect a rebound during the second quarter, but slowing business expenditures and the potential for ongoing trade disputes could weigh on the outcome. 

Charles Schwab Logo  - Waterloo Capital Weekly Market Commentary

Liz Ann Sonders – Charles Schwab
Long Train Running: Leading Indicators Show Little Risk of Recession

Summary: Economic data is still showing signs of improvement and almost no sign of a looming recession. That being said, while leading economic indicators have been great at signaling upcoming recessions, they have not been great at forecasting stock market returns. Because the stock market is always forward looking it can tend to lead the “leading indicators”, but a strong economy should help keep demand for stocks elevated going forward. 

BlackRock Logo - Waterloo Capital Weekly Market Commentary

Jeffrey Rosenberg, CFA – BlackRock
Are Bonds Still a Good Hedge to Stocks?

Summary: Bonds continue to offer downside protection to equity portfolios but investors need to be aware of the type of risks they hedge. Bonds have historically been a good way to protect against growth risks like recessions but they do not protect as well against inflation risks. When inflation fears are rising, holding a traditional bond allocation can actually increase portfolio risks. 

Mohamed El-Erian – Allianz
Managing the Risks of a Rising Dollar

Summary: The sharp appreciation of the US dollar shows how changes in a systemically important currency risk unbalancing markets elsewhere. Emerging markets are particularly vulnerable to a rising dollar. As volatility re-enters global markets and interest rates continue to rise in the US it is likely that investors who were seeking yields in foreign and emerging markets will begin to bring their capital back to the US. El-Erian expects the dollar to continue pressuring emerging market investments over the short term as the Fed pushes ahead and trade negotiations continue. 





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