Insights

X
Posted on April 16, 2018

Weekly Market Commentary April 16, 2018

Market Commentary

Markets ended positive for the week as energy and technology shares rallied and trade war tensions eased on all sides. These developments paired with earnings reports showing continued strength across all sectors drove stock markets higher. The S&P 500 rose 2.0% last week. The global MSCI ACWI climbed 1.6%. The Bloomberg BarCap Aggregate Bond Index dipped 0.2% as inflation risk and the odds of additional rate hikes increased.

Key points for the week

  • Inflation and interest rate risk continue to rise.
  • Consumer Price Index numbers indicate inflation pressure continues.
  • Odds of four hikes are now nearly 40%.

Market Perspective

 

The personal consumption expenditures (PCE) index continues to climb toward the Fed’s stated 2% inflation target. For the month of March, core PCE rose 1.96% from a year ago. Another underlying inflation gauge, the Consumer Price Index (CPI), increased 2.4% from a year ago, the largest increase since February 2017. Producer prices, health care, and rent increased steadily in March, and the tight labor market will likely lead to increased wage inflation going forward. Based on the numbers, investors are pricing in the probability of a rate hike in June, and the odds of four hikes in 2018 rose to nearly 40%.

Clearly, the Fed is anticipating reaching its goal. Even though there has only been one month when inflation increased above 2% in recent years, the Fed has raised rates five times in the last 16 months. The Fed’s concern is leaving rates too low will encourage financial distortions that cause the next bear market.


Fun story of the week

Atlanta Gas Station Uses Valets & Oregonians Aren’t Pumped About New Gas Law

A Shell gas station in Atlanta has decided to hire valets to pump gas for its customers. These 1950s-style valets will pump gas, wash windows, and even bring customers their receipts, while they wait in the comfort of their cars. Meanwhile, Oregon lawmakers recently passed a law to allow self-service gas stations in rural areas. Rural Oregonians used to valet service aren’t very happy about the law, which could lead to a new Oregon Trail leading right to Atlanta.


Share: