Market Update

News this past week:

  • Oil prices declined just over 2.5% last week
  • Drop in global government bonds accelerated
  • G20 summit shows the divide between the US and others
  • UN security council hold an emergency session in response to North Korea
  • Global stocks jumped and are still at near record high

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US dollar on the back foot

dollarsAs Trump voiced his concerns over the apparent ‘bunch of bad hombres down’ in Mexico, the less sensational Fed voted unanimously to keep rates on hold and gave little indication of a hike at the next meeting in March. Comments included ‘some further strengthening’ in the labour market, increasing inflation, albeit still below the central bank’s target, and ‘soft’ business sentiment.

One thing you cannot say about Trump is, unlike many politicians globally, he has followed through with some of his main campaign promises, albeit some more recent actions are deemed controversial by many. We suspect the broadly dovish Fed members will act on a wait-and-see basis, as there has been little to no guidance from the Trump administration with respect to fiscal policy deployment and the consequent effects on US growth. The futures market is pricing in over a 70% chance of a hike in June.

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Weekly Market Update

News this past week:

  • US economic growth disappoints as Dow Jones reaches 20,000
  • Trump’s executive orders fail to stir markets
  • UK High Court: Parliament must vote to trigger Brexit
  • UK economy grows 0.6% in Q4
  • Weaker yen boosts Japanese exports

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The Impact of the 2016 US Election on Investors

election-2016

Whilst the US election results are becoming harder to predict below are some of the likely economic impacts of the upcoming US election results.

 

Summary

  • Washington decision making is likely to become more fractious regardless of the election result. Divisions between and within the Republican and Democratic Parties have been growing, and an outcome whereby neither party would have a significant majority in the House of Representatives is a possibility.  This could make it harder to reach consensus on legislation, potentially heralding another return to dramatic showdowns over budget issues.
  • Corporate tax reform and increased spending on infrastructure appear to have some bipartisan support and would be a ripe area for negotiation in a divided Congress. Infrastructure spending should boost growth more than usual amid rock-bottom interest rates.
  • A growing backlash against free trade and immigration threatens to make economies more insular at a time when economic growth and productivity in many countries are barely above stall speed. Emerging markets have the most to lose, especially under a victory by Republican nominee Donald Trump. Mexico is a clear potential loser given its heavy reliance on exports to the US.
  • The US election campaign suggests rising populist sentiment is likely here to stay. We also see potential changes to income taxes, with ripple effects on US municipal bonds. We focus on two sectors that could be most affected by the election: financials and health care.  Mergers and acquisitions are set to face increased scrutiny if Democratic nominee Hillary Clinton prevails, as the Democrats appears to view anti-trust enforcement as a tool to boost competition and address inequality.

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Weekly Market Update

News this past week:

  • Markets buoyed by central bank meetings
  • Bond yields fall after US interest rates kept unchanged
  • ‘Hard Brexit’ speculation pushes sterling lower
  • Subdued PMI results for the euro area
  • Choppy week for oil ahead of OPEC meeting

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Monthly Market Commentary

August proved to be a particularly quiet month for markets, with low levels of volatility across equities and bonds, and little by way of significant news flow. Overall the ‘risk on’ environment of July, post the UK Brexit referendum, broadly continued in August: most equity markets rose modestly higher, with emerging markets leading the way and adding 2.5% in the month.

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