A Lesson in Volatility
Weekly Commentary, August 18th, 2017
- Equity markets were mixed this week with U.S. stocks (S&P 500) declining -0.58% while international stocks (EAFE) were up 0.36%.
- Fixed income markets were positive this week with investment grade bonds (AGG) up 0.07% while high yield bonds (JNK) were up 0.11%.
- Fed Minutes Released – The Federal Reserve released minutes from their July meeting suggesting that some members wanted to begin balance-sheet unwinding, although the majority ultimately decided to push the conversation until the upcoming September meeting. Lack of inflation continues to be the topic of discussion, although members are still confident it will eventually reach its target of 2%. Data between now and the September meeting will help determine when the Fed will decide to begin tapering down their $4.5 trillion balance sheet.
- ECB Minutes Released – Meanwhile in Europe, ECB officials remain uncertain how to signal changes in their policy settings as the economic outlook improves and the need for bond purchases lessens. The concern remains around a strengthening Euro that has stunted inflation to just 1.3%, well below the goal of 2%. A stronger currency depresses import prices which could stand as a hurdle for the region’s expanding economy.
- North Korean Tension – Kim Jon-Un announced he had decided not to launch a missile attack on Guam, helping ease tensions and causing markets to rally early this week.
- Commentary: A great piece by Richard Turnill on volatility which addresses what really drives a change from calm markets to a period of sustained volatility—hint: it isn’t simply time.
To read the full commentary, click below!