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In the Markets – Week-Ending February 17th

by Peter J. Creedon

Newsletter: In the Markets – Week-Ending February 17th
Crystal Brook Advisors
We Make Financial Planning Crystal Clear

United States: American investors decreased their holdings of foreign assets by $1.1 billion, marking 11 out of the past 12 months of being net sellers. (1)  The Federal Reserve’s January Senior Loan Officer Opinion Survey pointed to a modest tightening of consumer credit standards on balance. This barometer for overall credit market conditions has reported a steady decline in banks’ willingness to lend over the past five years, with the series edging another notch down to 3.1 percent in the fourth quarter (top chart). The decline coincides with the cyclical trend witnessed over the past several business cycles, which shows banks’ willingness to lend picking up early in economic recoveries and falling in the latter stages of the business cycle. (1)

Europe: Three large Eurozone economies, the Netherlands, France and Germany, hold important elections in coming months. There is potential, albeit seemingly at the margin, for populist and nationalistic parties coming to power in the Netherlands and France. Although the probability that either of these countries leaves the European Union (EU) in the foreseeable future is low, European financial assets, including the value of the euro, could be negatively affected by electoral success of these parties. This scenario would also represent a downside risk to our economic outlook for the Eurozone. (1)

Asia: IT IS easy to be downcast about the state of global trade. It has faced stiff headwinds in recent years: in 2016, for the first time in 15 years, it grew more slowly than the world economy. Regional and global trade deals are going nowhere, slowly. And America’s new president has promised to protect his country from trade-inflicted “carnage”. (2)  The simplest explanation for the rebound is that global demand is itself on solid ground. Global growth is still slower than before the financial crisis of 2008, but is heading in the right direction. Both the IMF and the World Bank think it will speed up a bit this year. Investors have turned more bullish: the MSCI all-world index, which covers 46 different markets, hit a record high this week. The rebound in Asian exports is more reason for bullishness. (2)

Latin America: Latin America’s trend toward more business-friendly governments will get a fresh test in Ecuador, where a president closely aligned with socialism has been in power for more than a decade. (3)  With support from about a third of voters, Lenin Moreno is leading the pack going into the first-round presidential elections Sunday. He was vice president under President Rafael Correa and represents a continuation of policies that critics say have widened deficits to unsustainable levels. Of his seven opponents, Guillermo Lasso and Cynthia Viteri appear best positioned to unseat Correa’s Alianza Pais party, with both polling well into double digits. (3)

Monday 2/13
  • European stocks rose on Monday, with the benchmark index ending at a more-than-one-year closing high, as investors interpreted U.S. President Donald Trump’s recent meetings with international dignitaries as signaling a softer foreign-policy stance. (4)
  • The Stoxx Europe 600 index SXXP, +0.03%  climbed 0.8% to 370.13, rising for a fifth straight session and logging its strongest close since Dec. 7, 2015 according to FactSet data. (4)
Tuesday 2/14
  • Most Asian stock markets rose Tuesday after U.S. stock indexes hit a new high and the American central bank chief said it could raise interest rates as early as next month. (5)
  • U.S. stock indexes hit new highs, boosted by bank stocks on hopes of bigger profits ahead. General Motors jumped 4.8 percent following news that France’s PSA Group, maker of Peugeot and Citroen cars, is exploring a deal to buy Opel, GM’s money-losing European business. Cynosure, which makes devices used in laser body contouring, hair removal and skin care, soared after agreeing to be bought by medical device maker Hologic for $1.57 billion. The Standard & Poor’s 500 index rose 0.4 percent to 2,337.58 for its sixth straight day of gains. The Dow Jones industrial average rose 0.5 percent to 20,504.41. The Nasdaq composite rose 0.3 percent to 5,782.57. (5)
Wednesday 2/15
  • Two key reports — retail sales and the Consumer Price Index — may provide more clues Wednesday than Janet Yellen about how soon the Fed could raise interest rates. (6)
  • Stock futures were mixed, the dollar was firmer and Treasury yields were slightly higher ahead of the testimony. Besides Yellen, traders will keep watch on the drama surrounding former national security adviser Michael Flynn and reports about Trump campaign contacts with Russian intelligence. (6)
Thursday 2/16
  • Overnight, Wall Street lost momentum, with the Dow Jones Industrial Average barely eking out its sixth straight record high, while the S&P 500 and Nasdaq snapped a seven-day winning streak as investors slowed buying to digest recent gains. (7)
Friday 2/17

Market Close

  • This Monday, Feb. 20, all U.S. banks and financial markets will be closed in observance of the Presidents Day, perhaps giving investors a chance to consider impressive stock gains so far this year. (4)

Contributor: Thomas Padula

Sources:  (1),Wells Fargo Economics Group (2), The Economist (3), Bloomberg (4), MarketWatch (5), Yahoo Finance (6), CNBC (7) Reuters