Wonder how much you’d need to invest in Treasuries to generate $100,000 in annual income? Or how stocks have performed historically in the months leading up to midterm elections (which 2018 is)? How about a snapshot of what it means to invest sustainably? If you’re wondering what often causes recessions and want to monitor the factors we believe matter most when assessing the state of the economy, check out our proprietary Recession Watch Dashboard. Continue reading
- WTI crude oil below $70/barrel on supply concerns. U.S. benchmark crude prices were down nearly 3% this morning as traders digested reports that OPEC, Russia, and others are in discussions to potentially increase production by up to 1 million barrels/day and realign the group’s production with its original accord that intended to reduce global supply to prop up prices; current production reflects ~150% compliance. The news comes on the heels of an announcement from the International Energy Agency last week that the supply glut is gone and the run-up in oil prices is starting to impact consumer demand, as well as political pressure from the U.S. stemming from a tweet from President Trump, who suggested that “Oil prices are artificially very high! No good and will not be accepted!”
What a difference a year (and change) makes. Emerging market debt’s (EMD) yield spreads to comparable Treasuries are more attractive than they have been since 2016. The Bloomberg Barclays Emerging Markets Sovereign Index currently yields almost 6.2%, its highest level since early 2016, Continue reading
- More trade ups and downs. President Trump ordered an investigation into whether auto and truck imports weaken the U.S. economy and threaten national security, which sparked a response from a Chinese official suggesting the move represented an abuse of trade rules. Though likely another part of the administration’s negotiation strategy, it may lead to new tariffs on foreign cars. This follows Trump’s statement that trade negotiations with China were not going well, even as China plans to cut import duties on many U.S. products on July 1. Trade tensions may continue to make it hard for U.S. stocks to make much headway in the near term as the administration’s strategy remains bold and somewhat unpredictable; however, we continue to view these moves as negotiation tactics.
Things are looking up for George Washington, as the dollar has staged a solid comeback after losing nearly 10% in 2017 and an additional 4% in January. Continue reading
- Is Turkey a canary in the coal mine? Turkey’s currency, the lira, has lost over 20% versus the dollar since the start of the year and dropped as much as 5% overnight, as market participants’ worries about the state of Turkey’s economy rose. The Central Bank of Turkey wants to raise rates to strengthen the currency and control inflation with authoritarian President Erdogan, who wants rates lowered, having made thinly veiled threats to interfere with Turkish Central Bank’s independence. Concerns have increased over the health of the government’s finances and the potential for rate hikes to trigger a credit event that could lead to risk aversion in other emerging market nations, which can be particularly vulnerable to contagion. That said, markets tend to miscalculate the likelihood of new threats leading to contagion, which we believe is likely the case here.
So what do you hear? Are you Team Yanny or Team Laurel? In case you haven’t heard, some people hear the word “Yanny,” while others hear the word Laurel in this epic division. Take a listen here and see what you hear. In the end, it comes down to how high or low of a frequency your ears can pick up. Scientists claim that most “younger ears” will hear Yanny, while “older ears” will hear Laurel. Continue reading
- 10-year Treasury yield holds above 3%. The 10-year Treasury yield again broached the 3% level last week, and unlike previous instances, it managed to stay above that level for the entire week, indicating Treasuries may have moved into a new range. As we discussed in last week’s Bond Market Perspectives, yields at current levels, while a step in the right direction for savers, are not yet high enough to put significant stress on the economy.
Solid economic growth should be good news for emerging market (EM) stocks, which have historically done well when economic growth in EM has accelerated relative to that of developed economies. Economic growth in emerging economies is looking up. Continue reading
- Earnings estimates rose past week. Over the last week, forward-four-quarter estimates for the S&P 500 Index rose 0.6%, and have risen by an impressive 1.3% since April 1. With 464 S&P companies having reported, first quarter S&P 500 earnings are tracking to a 26.2% year-over-year increase, while 79% of companies have exceeded earnings targets. Another 22 index constituents report results this week. We recapped earnings season in last week’s Weekly Market Commentary.