Volatility vs. Vitriol – Feelings and the Future
Weekly Commentary, February 17th, 2017
- Equity markets were positive across the globe with U.S. stocks (S&P 500) up +1.55% and international stocks (EAFE) up +0.60%
- Fixed income markets were mixed with investment grade bonds (AGG) down -0.09% and high yield bonds (JNK) up +0.16%
- Fed Chairwoman Yellen – testified before Congress this week and strongly indicated that the Fed will raise rates again by midyear—markets wobbled on the news.
- North Korean Missile Tests – were not only denounced by South Korea but also President Trump and Japanese Prime Minister Abe in a joint press conference.
- Canadian PM Trudeau – visited D.C. this week to discuss trade with President Trump, as well as the President’s approval of the Keystone Pipeline which runs from the Alberta oil sands, with both sides indicating the meeting went relatively well.
- Former PM Tony Blair – is urging citizens to demand a re-vote on Brexit, but given his current unpopularity is unlikely to influence such a decision.
- Greek Debt Crisis – the saga continues with Greek PM Tsipras saying he feels there will be a positive outcome, while European Commission President Juncker says a new deal remains on “shaky ground.” Next week is the stated deadline to agree on terms for a new bailout.
- Contrarian Trade? – U.S. stocks are now at a 40-year high relative to their European counterparts. European companies are currently trading at a forward-looking price-to-earnings (P/E) ratio of around 14.7 (MSCI Europe Index), compared to 17.8 for U.S. companies (S&P 500 Index). Geopolitical risks such as Brexit and the Greek debt situation still loom in the minds of Euro skeptics.
- Commentary: There is currently an interesting dichotomy regarding people’s mindsets as manifested in their outlook vs. investing behavior. Below we will take a quick look at this “personality split” in the U.S., and then review a macro look at the four fundamental areas that have historically been true threats to an economy.
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