From Fear to Fear — The Life of Too Many Investors (2017 version)
Weekly Commentary, April 7th, 2017
- Equity markets were down slightly this week (S&P 500 -0.23% and EAFE -0.75%) but proved resilient in what was a week of very negative headlines.
- Fixed income markets did what you would hope/expect and held up nicely in response to the uptick in equity volatility with high-quality bonds +0.15% and high-yield bonds +0.01%.
- Fed Minutes – The minutes of the FOMC March meeting showed that most member officials agree that they will look to begin reducing the size of the bank’s $4.5 trillion balance sheet later this year. This has led to some analysts speculating that the reduction in bond holdings may have a monetary effect and slow the pace of interest rate rises for the rest of 2017.
- European Central Bank – ECB President Mario Draghi reiterated this week that inflation in the Euro area is not strong enough for a shift to tighter monetary policy, but stressed that the bank “is confident that (their) policy is working.” In similar news out of the U.K., BOE policy makers suggested that faster U.K. inflation alone would not force rate hikes.
- Geo-politics and Missiles – geopolitics once again grabbed front page headlines with North Korea testing a ballistic missile, and the U.S. striking Syrian military targets after the country used chemical weapons on its own citizens. Tensions are high in Korea and Japan, as well as between the U.S. and Russia.
- Commentary: As investor sentiment and media headlines once again shift to the “bearish side” we take a look at the realities behind the most common narratives circulating, as well as some common investor mindsets that can lead them to trouble during such times.
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