Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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GDP data in focus - AM Briefing
28 Apr 2017
ECB round-up and US GDP look-ahead - Video Update
27 Apr 2017
ECB meeting in focus - AM Briefing
27 Apr 2017
ECB's Rate Meeting, a look ahead - Video Update
26 Apr 2017
High hopes for Trump tax cuts - AM Briefing
26 Apr 2017
Global stock indices storm higher - PM Bulletin
25 Apr 2017
Indices mixed after firmer open - AM Briefing
25 Apr 2017
How to use Stop Losses in FX - Trading Guide
24 Apr 2017
French vote sees risk assets soar - AM Briefing
24 Apr 2017
Mixed European open despite Wall Street rally
21 Apr 2017
French Election in focus - Video Update
20 Apr 2017
French election and oil keep investors cautious - AM Briefing
20 Apr 2017
Equities off highs but still show resilience - Video Update
19 Apr 2017
Equities continue to drift lower - AM Bulletin
19 Apr 2017
Sterling soars on early UK election, but France the biggest concern
18 Apr 2017
Europe shrugs off US rally - AM Bulletin
18 Apr 2017
Trump's mouth sends dollar skidding lower - Video Update
13 Apr 2017
Dollar slumps on Trump comments - AM Bulletin
13 Apr 2017
Uncertain outlook ahead of holiday weekend - Video Update
12 Apr 2017
Equities recover after yesterday’s wobble - AM Briefing
12 Apr 2017
USDJPY approaching support - PM Bulletin
11 Apr 2017
Equities drifting in holiday-shortened week - AM Briefing
11 Apr 2017
Look-ahead to Janet Yellen’s speech this evening - PM Bulletin
10 Apr 2017
All eyes on G7 and Yellen - AM Bulletin
10 Apr 2017
US missile attack sends investors into “risk-off” mode - AM Briefing
07 Apr 2017
FOMC minutes rattle investors - Video Update
06 Apr 2017
Stunning reversal greets Fed minutes - AM Briefing
06 Apr 2017
ADP number points to big payroll beat on Friday - Video Update
05 Apr 2017
FOMC minutes in focus - AM Briefing
05 Apr 2017
US indices flag as first quarter ends - PM Bulletin
04 Apr 2017
Disappointing start to the new quarter - AM Briefing
04 Apr 2017
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The first quarter of 2017 wasn’t too shabby as far as the main US stock indices were concerned. The Dow Jones Industrial Average finished up 4.6% over the first three months of this year, the S&P 500 rose 5.5% while the Nasdaq100 was up a stunning 11.7%. In fact, the Nasdaq100 finished the quarter trading at all-time record highs, helped along by Tesla which is up over 30% from the beginning of the year. And that was before yesterday’s stunning rally of just under 3% which meant that Tesla now has a bigger market capitalisation than Ford. Yet last year Ford sold 6.7 million vehicles compared with just 76,000 for Tesla.

But the overall positive performance for the quarter hides the fact that the Dow struggled in March, falling just under 1%. Meanwhile the S&P500 and the broader-based Russell 2000 were little-changed over the last four weeks. It was only the tech-heavy Nasdaq which managed to make gains, adding 2% over the course of March. It’s also worth remembering that the month started bullishly with all the aforementioned indices registering record highs on the first day of the month. Investors piled into equities followed Donald Trump’s address to Congress. This was regarded as his most conciliatory and unifying since his victory speech back in early November. It was also considered to be his most presidential as it was optimistic in tone and addressed the administration’s future plans while avoiding snipes at either the media or the previous presidency. The speech was light on detail, but investors felt that its tone should help the administration push much of their plans through Congress.

Yet since then there have been some significant set-backs on the political front. For a start, the Trump administration failed to push the repeal and replacement of Obamacare through Congress. On top of this the presidency is embroiled in a controversial argument with the security services and the prior administration over wiretaps and links with Russia. For now investors continue to give Mr Trump the benefit of the doubt, convinced that his ambitious plans for tax cuts, regulatory reform and infrastructure spending will still get through Congress and provide the economy with a massive dose of fiscal stimulus. That may be, but it’s unlikely to happen this year.

So instead there are signs that market participants are back to reacting to rate hike speculation and economic data releases. There was a clear indication of this yesterday when US Treasury yields plummeted on poor auto sales data. Consequently, there may be some nervousness ahead of Friday’s Non-Farm Payroll release. Bear in mind that last month saw a very strong number which was foreshadowed by the ADP Payroll number just two days previously. We’ll get the latest ADP update tomorrow afternoon. Then later on we have the release of the minutes from the FOMC’s monetary policy meeting on 15th March. This was when the Fed hiked rates by 25 basis points and forecast two more rate hikes for the rest of this year. This led analysts to describe the move as a “dovish rate hike” as the consensus view going into the meeting was that the FOMC would signal three further hikes of 25 basis points each in 2017. Analysts will carefully parse tomorrow’s minutes to see if they provide further clues to the Fed’s thinking. While a gradual pace of monetary tightening is considered positive as the central bank attempts to normalise rates after years of stimulus, there’s a danger the Fed is planning to hike rates further just as the economy shows signs of flagging.


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Posted by David Morrison

Category: PM Bulletin

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