Weekly Market Commentary

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Jeffry Bartash – MarketWatch
Consumer Inflation Hits 6-Year High

Summary: Consumer prices rose at the highest rate since 2012 gaining 2.9% over the past year. Core CPI, which strips out food and energy prices, rose at 2.3%, the highest level since the Great Recession. Rising prices have essentially wiped out the modest wage gains many workers have seen over the same time period. 

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Patti Domm – CNBC
Key Yield Curve Spread Hits Narrowest Level in 11 Years

Summary: The spread between the 10-year Treasury and the 2-year Treasury continues to tighten. A flatter yield curve indicates possible economic weakness and an inverted curve is a forewarning of a recession. The Fed believes that the signal may be a “false alarm”, and that the longer end of the curve will begin to rise with inflation and positive GDP reports. 

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Julia Horowitz – CNN Money
Trump Announces Tariffs on $200 Billion of Chinese Goods

Summary: The Trump administration announced an additional 10% tariffs on $200 billion of Chinese goods. The $200 billion number is significant because China does not import that amount from the US making equal retaliation impossible. If the trade war escalates, China may begin to target services industries.

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Nicola Mai and Andrew Bosomworth – PIMCO
Uncertain Outlook for The Eurozone

Summary: The global economy is transitioning out of a period characterized by remarkable stability and the resulting changes could be jarring for global investors. Europe is dealing with complicated issues such as the emergence of populist political parties, shifting global trade sentiment, fiscal expansion, and less reliance on central banks. The resulting environment likely caps the upside in European markets going forward. 

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Christopher Dhanraj – Blackrock
What’s Behind The Small-Cap Boom?

Summary: Small-cap stocks have outperformed the broader market recently because of three key factors. First, tax reforms provide a greater benefit to small-cap companies which derive the majority of their business from domestic operations. Second, strong domestic economic growth has led to positive earnings expectations for small-cap companies. Lastly, a stronger dollar has less of a detrimental effect on small-cap earnings because they have less exposure to foreign currencies. 





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