It’s the beginning of June, and I haven’t been this happy to welcome a new month in a very long time. I suspect many investors and market watchers have that same feeling. May was brutal for markets — but it was more than just that. The month of May was, in my opinion, a game-changer. So much happened that no one expected to happen:
Comments Off on The month of May was a ‘game-changer’ for marketsAll eyes were on Europe this past week. First, U.K. Prime Minister Theresa May announced her resignation. Then the European parliamentary elections took place. Here are the key takeaways from a momentous week for the European continent.
Comments Off on What does the fragmented parliamentary election mean for Europe?
The economic implications from an inverted yield curve may be overstated, in our view. Historically, when short-term interest rates, anchored by central bank policies, yield more than longer duration maturities the bond market is signaling that monetary policy has become restrictive. Taking on more interest rate risk in your portfolio for less yield to maturity is an unattractive option for investors.
Comments Off on Canadian yield curve points to slow growth, not recession
It seems that so much happens in a given week these days. However, this week could be particularly momentous as we start to get answers on some key questions that have implications for global markets. Here are five events to watch:
Comments Off on Global markets: Five events to watch this week
Last week took investors on a roller coaster ride. The climax came at the stroke of midnight on Friday, May 10, when U.S. President Donald Trump’s newest tariffs went into effect – a 25% toll on $200 billion of Chinese goods. Then later on Friday, the negotiations ended with no material progress, and there are no formal plans to resume talks. What’s more, China retaliated the morning of May 13 by announcing tariffs on U.S. goods being imported to China.
Comments Off on Talking tariffs: New tolls threaten to further strain U.S.-China relationsU.S.-China trade talks have taken a turn for the worse in the last several days and may temporarily go off the rails.
Comments Off on U.S.-China trade talks stumble, and stocks tumbleEconomic policy uncertainty has for decades been recognized by economists as having the potential to negatively impact economic growth. In 2015, economists Huseyin Gulen and Mihai Ion found that economic policy uncertainty has a strong negative correlation to business investment.1 This built on previous research from the 1980s that showed that high uncertainty gives firms an incentive to delay investment decisions, especially in situations where reversing an investment decision can be costly.2
Comments Off on Brexit: The consequences of economic policy uncertaintyIt is spring and elections are in the air – along with expectations for increased polarization and uncertainty across Europe.
Comments Off on Elections may bring answers – and more questions – for Europe
The Bank of Canada (BoC) left the target rate unchanged at 1.75% at Wednesday’s meeting. While the outcome was expected, the tone of the statement was certainly on the dovish side.
Comments Off on Bank of Canada shifts back to data dependency
In the past several months, we have seen central banks make an abrupt turn toward a more dovish monetary policy stance. The initial assumption by markets was that this was a decisive turn. However, more recent communications suggest otherwise. As doubts about economic growth continue to grow, so does uncertainty about the path of policy.
Comments Off on Looking for clues on growth
Last week was a momentous one for central banks – the minutes from the March Federal Open Market Committee (FOMC) meeting were released, giving us insight into the Federal Reserve’s views on the global economy and rate cuts, and the European Central Bank (ECB) decided to remain on its ultra-accommodative path. We were reminded that central banks are critical for supporting growth, controlling inflation and stabilizing economies – a task that is growing increasingly difficult as these institutions become more politicized.
Comments Off on Can central banks still be effective?
I have the good fortune of meeting with advisors across Canada and hearing directly about the issues that are top of mind for their clients and their businesses. Usually there’s a certain amount of consistency to what they tell me in terms of sentiment in the market. The big picture view of asset class trends also tends to provide a consensus on where advisors are actively making allocations and how they are positioning investor portfolios.
Comments Off on What’s your risk outlook?
Last week I had the pleasure of traveling in Europe, meeting with colleagues and clients in several different countries. It was a whirlwind tour, but it was well worth the jet lag to get an in-person account of the various issues facing Europe today. Below, I share three key takeaways from my trip.
Comments Off on Three key takeaways from four days in EuropeThe first quarter of 2019 was a wild ride for capital markets — equities and government bonds rallied as U.S. Treasury yields and German bund yields sunk. This was a clear dichotomy, indicating optimism in the stock market but pessimism about the global economy. I believe this reflected more accommodative monetary policy from the Federal Reserve and other central banks, suggesting a more supportive environment for risk assets such as equities, while weakness in some economic data suggested a slowdown in global growth, pushing yields down. In this week’s blog, I discuss six current issues that could impact capital markets in April and beyond.
Comments Off on Six issues to watch in April
The latest installment of the Brexit saga went into overtime again on the evening of March 27, as the House of Commons engaged in a first round of “indicative votes” on alternatives to U.K. Prime Minister Theresa May’s withdrawal deal. While the resolution remains uncertain, the contours of a way forward are finally starting to take shape based on voting preferences among the many alternatives put to an indicative vote.
Comments Off on U.K. Parliament begins to reveal its Brexit preferences
There’s been a lot of negative news headlines about the Canadian economy lately, ranging from consumer indebtedness, poor productivity growth and subscale innovation hubs. All of this doesn’t paint a rosy picture for investors.
Comments Off on Why Canadian headline noise doesn’t faze me
Monetary policy disruption was on full display last week: The U.S. Federal Reserve (Fed) announced a momentous change to its normalization plan, the yield curve inverted and sparked investor concerns, and a noted Fed critic was nominated to the central bank’s Board of Governors.
Comments Off on A dovish Fed and an inverted yield curve spark market concerns
The Federal Reserve (Fed) held the target range for the U.S. federal funds at 2.25%-2.50% at its meeting on Wednesday. This outcome was in line with market expectations. In addition, the Fed indicated they do not expect to hike rates again in 2019 and only expect one hike in 2020.
Comments Off on The Fed delivers on the dovish side
Artificial intelligence (AI), quant funds, high-frequency trading, big data — these terms get thrown around a lot these days and can create confusion and uncertainty. (Case in point: Tesla CEO Elon Musk has said that AI is more dangerous than nuclear weapons, with Facebook CEO Mark Zuckerberg calling such statements “pretty irresponsible.”1) Beyond such dramatic statements, it’s clear to see that quants and high-frequency traders (HFTs) account for more than half of all US equity trading. How does all of this fit into the investing world as we see it?
Comments Off on Fighting the ‘algorithm wars’
The latest installment of the Brexit drama offers good and bad news for investors in U.K. assets and beyond: The good news is the risk of a “no deal” Brexit has receded, but the bad news is it’s still a possibility and the timeline toward resolution is now more extended. This means that persistent uncertainty is likely to continue to weigh on the U.K. and wider European economies, and may elevate the volatility of U.K. asset markets, particularly the currency.
Comments Off on Brexit uncertainty could last for another 21 months
