Weekly Market Commentary

Summary: In a surprise announcement, President Trump called for new tariffs on imported cars, trucks, and auto parts. The announcement was likely linked to deteriorating talks between Mexico, the US, and Canada regarding NAFTA. The Trump administration has been pushing for new rules that require vehicles to be manufactured in the US to qualify for tariff-free trade. 

Summary: The consensus prime minister chosen by The League and 5-Star movements has been given a mandate to form a government. Giuseppe Conte, a lawyer with no government experience is tasked with establishing a cabinet for Presidential approval. European stock markets fell on the news based on the expectation that the new regime will complicate relations with the European Union and Italy’s delicate financial standing. 

Summary: The countries discussed easing output limits that have been in place since early 2017. Leaders from both countries are attempting to strike a balance between prices that are high enough to support their domestic economies, but not so high that consumer countries cut their demand for crude. Production increases will be discussed further at OPEC’s June meeting. 

Summary: A measure signed by President Trump will rollback regulations that were put in place after the financial crisis. The rollback raises the capital threshold that requires banks to undergo stress tests and submit “living wills” from $50 billion to $250 billion. The changes will allow small and medium-sized banks to pursue more expansionary measures and increase their lending activity.  

Summary: American energy companies are poised to see big benefits from the recent rise in oil prices and demand. Since 2014, US oil imports have doubled to over 7 million barrels per day and demand has shown no signs of slowing down. Rising demand, coupled with a decline in capital expenditures in recent years, is expected to lead to supply constraint. Analysts expect that around $3 trillion will need to be invested by 2020 to bring enough supply online to keep prices low. 

Summary: Major indexes are still range bound after slightly recovering from the February correction. A rebound in US economic activity during Q2 should help support the markets in coming months but risk levels are rising. The strength of international equities has faded slightly and geopolitical risks have had a greater effect on foreign markets. The Schwab team expects the bull market to continue, but the increase in volatility should also temper investors’ expectations.