A victory for the centrist Emmanuel Macron in the first round of the French Presidential Election sent equities, interest rates, and the dollar higher this week. Polls are forecasting an easy victory in the second round for Mr. Macron over nationalist politician and Eurosceptic Marine Le Pen. The result was a welcome development for the so-called “reflation trade” after political uncertainty on both sides of the Atlantic and some disappointing data spurred a bond rally while equities languished. We continue to like our allocation of globally diversified equities, a short duration bias in fixed income, and exposure to emerging markets.Read more
Last week we changed our portfolio allocations, increasing exposure to emerging markets and foreign exchange as well as taking broader fixed income exposure. But first we’ll cover the economy. A huge miss on the jobs report and recent threats of military escalation in the Far and Middle East sent bond yields lower while the dollar continued to depreciate against many of the world’s currencies. The disconnect continues between so-called “soft” survey data and the more traditional economic statistics. However, optimism remains elevated even as more traditional measures of economic activity indicated subpar growth in the first quarter.Read more
Equities have stumbled over the past several days and interest rates have fallen alongside the dollar. The main impetus for the move was a failed attempt by the new administration and Republican members of the House of Representatives to repeal and replace the Affordable Care Act, or Obamacare.Read more
Interest rates have continued to rise while equities tread water as a March rate hike by the Federal Reserve became a certainty. Today the FED raised rates ¼ of one percent or 25 basis points. Attention has now shifted to any information that can be gleaned from Chair Yellen and the rest of the FOMC on the likely pace of hikes for the rest of the year.Read more
As equities continue to charge ahead, both the dollar and real interest rates remain in a holding pattern. Increased uncertainty over the likelihood of tax cuts and increased infrastructure spending have led many to question the continued justification for a “Trump Rally.” Accelerating inflation and statements from Fed Bank Presidents Williams and Dudley have brought the Federal Reserve back to center stage as the March meeting of the Federal Open Market Committee approaches.
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