Market Update: Thursday, March 22, 2018


Daily Insights

  • The Fed increased rates. As expected, the Federal Reserve (Fed) increased the fed funds target by 0.25% to a range of 1.50%-1.75%. This was the sixth rate hike during this cycle. It’s important to note that the median dot plot for 2018 remained at three rate hikes, and there were stronger revisions to growth, employment forecasts, and inflation. Additionally, the Fed is now expecting four rate hikes in 2019, up from three. We have believed that the Fed would hike rates three times this year and yesterday’s events further support our view. For more on our takeaways from yesterday’s decision, please read our latest LPL Research blog.

  • Government spending agreement made. Politico is reporting that congressional leaders have agreed on a $1.3 trillion spending bill that would fund the government through September. The House is likely to vote today, with the Senate voting tomorrow. This could remove any concerns over a potential government shutdown.

  • Firms’ expectations still positive as Eurozone PMI hits 14-month low. Business activity in the 19-member Eurozone region declined last month with the 55.3 reading in the Markit flash composite Purchasing Managers’ Index (PMI), though still firmly in expansionary territory, indicating that the pace of economic growth in Europe is slowing amid continued strength in the euro, which hampers export demand. Manufacturing dragged on growth more so than services; however, job gains were a bright spot in both sectors as companies commonly cited the need to boost head count to meet current and expected future demand.

  • Little changed with the BOE. The Bank of England (BOE) kept rates unchanged as expected. However, two policymakers voted to raise rates, putting upward pressure on the British pound this morning and increasing the likelihood of a hike at the next meeting in May. All in all, the U.K. economy has held up okay amid Brexit uncertainty (Bloomberg consensus gross domestic product growth in 2018 is 1.5% vs. 1.7% in 2017), while inflation has stabilized, though at high levels relative to developed nations. Looking ahead, the BOE issued a warning about the potential impact of global protectionism and highlighted Brexit as the most important factor in its economic outlook.

  • The latest on China tariffs. It is widely expected that President Trump will announce tariffs on Chinese imports today, and the latest figure is $50 billion targeting as many as 100 categories. The Wall Street Journal reported that the tariffs wouldn’t be imposed immediately though. Additionally, Treasury Secretary Steve Mnuchin is set to propose restrictions on Chinese investments in the United States. Most expect some type of Chinese retaliation fairly quickly.

  • EM may still represent the best option for “growth at a reasonable price.” Emerging market (EM) equities are trading at 12.5 times 2018 consensus estimates, well below the U.S. (17 times) and below developed markets (14 times). Relative to long-term averages, the United States and Europe are the most expensive, while Japan and EM are the cheapest. Earnings estimates have not yet been impacted by trade fears, though they have stopped rising over the past month. Consensus estimates for 2018 are calling for 18% earnings growth in the United States (S&P 500 Index), 9.4% in developed markets (MSCI EAFE), and 16% for EM (MSCI Emerging Markets). Escalating trade tensions remain the key risk for all of these markets in our view.


Click Here for our detailed Weekly Economic Calendar


  • Weekly Jobless Claims (Mar 17)
  • FHFA House Price Index (Jan)
  • Markit Mfg. & Services PMI (Mar)
  • LEI (Leading Index) (Feb)
  • Kansas City Fed Mfg. Activity (Mar)
  • France: Markit France Mfg. & Services PMI (Mar)
  • Germany: Markit Germany Mfg. & Services PMI (Mar)
  • Eurozone: Markit Eurozone Mfg. & Services PMI (Mar)
  • Germany: IFO (Mar)
  • Eurozone: Current Account Balance (Jan)
  • Italy: Current Account Balance (Jan)
  • UK: Retail Sales (Feb)
  • ECB: Publishes Economic Bulletin
  • BOE: Bank Rate
  • BOE: Asset Purchase Target
  • BOJ: Outright Bond Purchase
  • Bank of Canada: Wilkins
  • Japan: All Industry Activity Index (Jan)
  • Japan: CPI (Feb)


  • Durable Goods Orders (Feb)
  • Cap Goods Shipments & Orders (Feb)
  • New Home Sales (Feb)
  • Revisions: Industrial Production & Capacity Utilization
  • Bostic (Dove)
  • Kashkari (Dove)
  • Canada: Retail Sales (Jan)
  • Canada: CPI (Feb)
  • Bank of Russia: Key Rate
  • Bank of Russia: Nabiullina


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted. All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

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