Broadly, U.S. and International equity markets rallied on Friday to finish the week in positive territory. Global equities finished both the one month and year-to-date periods in positive territory as well; although they have not yet fully recovered from 2018’s 4th quarter correction. Equity markets have produced above average returns so far this year and slowed their pace slightly to digest congressional testimony from U.S. Federal Reserve Chairman Jerome Powell and U.S. Trade Representative Robert Lighthizer, as well as escalating tensions in the Middle East and Asia.
During his semi-annual testimony, Powell indicated that interest rate hikes will likely be on hold for the foreseeable future, with an eye on inflation which he does not see as a threat at this time. Markets have not priced in any rate hikes for 2019. Following Monday’s positive trade sentiment after the tariff deadline with China had been pushed back last week, Lighthizer testified on Tuesday that progress had been made, but that China’s concessions to buy more American goods would not be enough to strike a deal yet as the issue of intellectual property theft has not been adequately addressed.
S&P 500: 2803.9 (+0.4%)
FTSE All-World ex-US (VEU): (+0.3%)
US 10 Year Treasury Yield: 2.76% (+0.11)
Gold: $1292 (-2.6%)
EUR/USD: 1.136 (+0.2%)
- Monday – U.S. stocks climbed Monday, after President Trump said he would delay a planned increase in tariffs on Chinese goods.
- Tuesday – Stocks closed lower as investors waited for additional news on trade.
- Tuesday – U.S. Appeals Courts rejected a Justice Department challenge to the AT&T and TimeWarner deal, paving the way for the merger to proceed.
- Wednesday – The clash between India and Pakistan over boarders intensified as both countries claimed to have shot down at least one warplane.
- Wednesday – U.S. Labor Department probed Fidelity over hidden fees in some of their mutual funds.
- Thursday – U.S. and North Korean denuclearization talks ended early without agreement amid U.S. reports that North Korea was asking for a reprieve from all economic sanctions in return for partial, but not full denuclearization.
- Thursday – The U.S. Senate confirmed former Energy Lobbyist Andrew Wheeler as the new Head of the EPA.
- Friday – Gap announced plan to spin off Old Navy into its own publicly traded company.
As has been the case more-often-than-not recently, we saw a number of headlines related to U.S. Politics as President Trump’s former personal lawyer Michael Cohen testified in front of congress and legislation to counter Trump’s national emergency moved from the House to the Senate. We believe that the global markets will continue to be mostly insulated from these hearings and legislation and that is important to continue to focus on news that will affect market fundamentals such as interest rates, tariff discussions and global sanctions.
A pause in rate hikes is likely a positive sign for U.S. markets and foreign currencies, while continued uncertainty regarding U.S./China trade as well as the potential for more economic sanctions on Oil-producing countries will drive U.S. and Global markets more than political headlines in the U.S. will. A diversified portfolio with exposure to different geographies and asset classes should help investors navigate the uncertainty going forward.