It was a newsworthy week with meetings from both the Fed and the ECB, a general election in the UK, the world’s largest IPO in history, and a preliminary trade deal struck between the U.S. and China. Ultimately, the progress on trade was enough to send global equities higher, led by gains in foreign markets. Gold also climbed, while treasuries were relatively flat.
S&P 500: 3,169 (+0.8%)
FTSE All-World ex-US (VEU): (+1.8%)
US 10 Year Treasury Yield: 1.82% (-0.02%)
Gold: $1,476 (+1.1%)
EUR/USD: $1.112 (+0.5%)
- Monday – PG&E Corp disclosed it expects to take a ~$4.9 billion charge in the fourth quarter related to wildfire victims.
- Tuesday – House Democrats announced they are pursuing two articles of impeachment against President Trump, including abuse of power and obstruction of Congress.
- Tuesday – The U.S. reached a new trade agreement with Mexico and Canada, removing the risk of a U.S. withdrawal from NAFTA.
- Wednesday – The U.S. Federal Reserve left its benchmark rate unchanged at the latest FOMC meeting.
- Wednesday – Shares of Aramco began trading in Saudi Arabia, valuing the company at $1.7 trillion in the world’s largest initial public offering.
- Thursday – Boris Johnson won a decisive victory in the UK’s general election, paving the way for a January Brexit.
- Thursday – In her first policy meeting as president of the European Central Bank, Christine Lagarde left interest unchanged at minus 0.5%.
- Thursday – President Trump signed off on a phase-one deal with China.
- Friday – China announced it agreed to the phase-one deal, which includes an increase in imports from the U.S. and halts plans for additional tariffs.
There was a trend this week. Most of the major events, regardless of whether they’re perceived as good or bad, helped remove some uncertainty for investors. And less uncertainty is usually a good thing for markets. The first major event was the Fed’s FOMC meeting, where it left rates unchanged and struck a mostly positive tone on the economy. More importantly, there was a broad consensus that rates are likely to remain static through 2020 unless conditions materially change. That’s a pretty good line of sight that should help allay concerns of a rapid resumption of tightening.
And after years of uncertainty, we finally got some clarity on the direction of Brexit. Boris Johnson won a decisive victory in his country’s general election, giving him the required votes to take the UK out of the European Union, making a January Brexit virtually assured. This will of course create some economic disruption, but the impact is unlikely to derail the global economy.
And finally, there were positive developments in the trade war with China, as both sides reached a “phase-one” deal. Under the agreement, new tariffs set to go into effect over the weekend will be halted, and China will increase imports from the U.S. There were reports that existing tariffs could be rolled back in stages, although full details were not available. Regardless, the sheer fact that both sides were able to agree on something is progress. And it at least removes the fear of a material escalation. For now….