Weekly Market Commentary





American Flag - Waterloo Weekly Market Commentary

Jeff Cox – CNBC
Q2 GDP Shows Strong Growth

Summary: Q2 GDP came in at 4.1%, which is the fastest rate of growth in nearly four years. Consumer and business spending were the strongest drivers of growth. Declines in private inventory investment and residential fixed investment and an unexpected decline in inventories were the main drags. 

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Grace Panetta – Business Insider
Trump Strikes Preliminary Trade Deal With EU

Summary: President Donald Trump on Wednesday said he struck a preliminary deal with European Union officials to avoid a full-blown trade war, causing stocks to soar. The EU will import more American soybeans and natural gas, adjust regulations to help medical devices be traded more easily, and both sides will decrease industrial tariffs. The EU had threatened to impose retaliatory tariffs on $20 billion of US goods if the talks failed.

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Reuters
ECB Leaves Policy Unchanged

Summary: The European Central Bank kept its policy unchanged on Thursday and said it still plans to wrap up its lavish bond purchases by the end of the year and sees interest rates at record lows through the summer of 2019. Draghi also spoke of the trade war, stating that ” A trade war, where you have rounds of retaliation and rounds of responses, would create an entirely different climate. And we will have to assess both the direct effects, which may be significant as the numbers significantly go up, and indirect effects of confidence, especially on business investment.”

Japanese Flag - Waterloo Weekly Market Commentary

Sunny Oh – MarketWatch
Market Tests Bank Of Japan’s Policy

Summary: News reports earlier this week indicated policy makers would discuss tweaks designed to make their extraordinary stimulus measures more sustainable. That stirred expectations the central bank could start moving away from its ultra-accommodative policy stance and sparked a temporary selloff in government paper in Japan, Germany and the U.S. The chief concern for investors and the central bank is that Japanese financial institutions have seen slimming margins from borrowing short and lending long thanks to negative to ultralow interest rates.

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John Devir and Danny Seth – PIMCO
FERC Change Is Positive for MLPs

Summary: The final FERC ruling issued 18 July essentially excludes MLPs with a C corporation parent – the most common ownership structure – from the proposed policy changes. The modified ruling triggered sharp rebounds for the names hurt most by the March policy announcement regarding the treatment of deferred tax allowances. Several key factors support our constructive view on MLPs, including still-high starting yields, improving company fundamentals, attractive valuations relative to high yield and other income-oriented sectors, and a robust oil and gas production backdrop.

Shipping Containers - Waterloo Weekly Market Commentary

Scott Minerd – Guggenheim
Why No One Really ‘Wins’ A Trade War

Summary: Tariffs are a form of taxation that ultimately is paid not by the exporter, but by the U.S. consumer. If Chinese machinery coming into the United States is slapped with a 25 percent tariff, then all machinery prices will rise. Moreover, the economy-wide increase in the price of goods and services in the United States, called inflation, will only be driven higher by tariffs. The yield on the 10-year Treasury note will likely rise to somewhere between 3–3.25 percent in this tightening cycle, with the possibility of briefly reaching as high as 3.5 percent.


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