Financial Markets Monitor
Q3 2017: Financial Markets Monitor
The U.S. economy continues to plod along, with a slight uptick in Q2 after a sluggish Q1. We do not expect a “breakout” in the second half, but rather, a continuation of the economy’s growth rate in the 2.0–2.5% range.
Q2 2017: Financial Markets Monitor
U.S. economic expansion is on solid ground, aided by improving growth trends overseas. Despite full valuations the equity bull market is intact, supported by:
- Low recession risk and tame inflation
- A gradual path for interest rate hikes by the Fed
- Earnings growth, with potential upside from corporate tax cuts
Q1 2017: Financial Markets Monitor
Donald Trump’s pro-growth message spurred a post-election U.S. equity rally. Domestic stocks again outperformed most foreign markets, as the strong U.S. dollar suppressed overseas returns. A post-election sell-off left investment-grade bond returns barely in positive territory for the year. The high-yield market rallied in sympathy with equities.
Q4 2016: Financial Markets Monitor
A post-Brexit rally has pushed global returns higher. International equities have lagged U.S. for longer time periods. Strong bond returns were supported by weak global growth and a status quo Fed. High-yield bonds have performed well following the 1Q nadir.
Fixed Income Market Review
Q2 2017: Fixed Income Market Review
Markets, given the lack of recent inflation, have not bought into the Fed’s projections. Market expectations for both inflation and Fed action have diverged from Fed guidance.
Q1 2017: Fixed Income Market Review
Despite the growing acceptance around rate normalization, longer-term rates are lower since the March tightening, and odds of future rate increases have diminished for a number of reasons.
Q4 2016: Fixed Income Market Review
U.S. Election results had a much greater impact on market yields. Expansionary fiscal policy, potentially funded by an increase in the budget deficit, is projected to increase inflation and reduce the need for extraordinary monetary policy.
Q3 2016: Fixed Income Market Review
The Fed raised expectations for higher short-term rates prior to year-end, but also signaled lower rate projections than previously communicated for 2017 and beyond.
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