American Consequences - June 2018

WHAT MOVED THE MARKET THE BIGGEST STORIES THAT MATTERED FOR THE MARKET LAST MONTH...

about $50 to $100 billion in the context of a global, $87 trillion marketplace. Interest rates settled, and the 10-year Treasury yield moved back below 3%, though the yield curve continued to flatten out. The dollar rallied and the euro traded to the lowest level this year. Meanwhile, emerging markets were volatile... There were leadership changes in Italy and Spain, and the Turkish lira dropped 18% versus the dollar as local interest rates soared. A strong dollar and higher rates caused cash to be sucked out of developing economies. OPEC and Russia announced an end to supply caps, hurting oil prices throughout the month. Tensions in the Middle East have come off the boil, and the civil tone from the Korean Peninsula has been another headwind for crude prices. Gold has been stuck in limbo, and the dollar strength versus the major crosses (and modestly higher global interest rates) have kept buyers at bay. Bitcoin and cryptocurrencies in general have had a horrible month. Corruption and claims of fraud have been consistent headlines and the technical trend shows a complete breakdown. Despite this month’s political turmoil, markets are steady. Investors are ignoring the noise and are focused on earnings, wage growth, employment gains, buybacks, and dividend increases. CHAOS IN COMMODITIES AND CRYPTOS...

THE BULLS TAKE THEWHEEL IN JUNE...

Escalating geopolitical tensions caused global market volatility this month, but the U.S. proved to be a safe haven, and the Nasdaq and small-cap stocks (like the Russell 2000) made new all-time highs. Tech was a consistent growth sector, and first-quarter earnings were up 32% year over year. Global fund managers had to increase exposure to keep pace with their benchmarks. Retailers saw better foot traffic, margin expansion, and revenue growth, and spending patterns look promising. Recent jobs numbers and unemployment data were excellent, and small-business optimism was at a 34-year high. Although discussions with China are ongoing, the argument remains that the U.S. runs a $375 billion annual trade deficit with the country. The recent G-7 meeting was unruly and tense, and theWhite House said that current trade practices are unfair and it will not back down from demands to level the playing field. Equity markets rallied because investors have rationalized the trade debate as an argument TRADEWARS AND TARIFFS HEAT UP...

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THE FED AND THE ECB...

This past week was the most important of the month and likely the year...

12 June 2018

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