Will Trade Tensions and Geopolitical Events Weigh on Markets?

Despite the distraction of everything except economic fundamentals, U.S. equities managed to deliver another week of higher prices, but only by the slimmest of margins. The S&P 500 index rose all of 0.02 percent, its fourth straight week of gains, but had to overcome major developments in monetary, trade and foreign policy to do it.

Markets Ignore Trade and Political Concerns

U.S. equities enjoyed a third straight week of gains, as the S&P 500 index climbed another 1.6 percent. During this three-week period, the index has risen 2.4 percent, as investors have focused on evidence of firming economic activity, and chosen to overlook, at least for now, their concerns over trade tensions and politics. And it wasn’t technology that led stocks higher this time, although as a sector it did rise modestly. Rather it was consumer discretionary stocks that led the way higher last week, followed by materials, consumer staples and financials.  

Can Investors Look Beyond Trade Concerns and Global Political Jitters?

U.S. equities managed to overcome Eurozone political jitters to post a 0.5 percent gain last week. Things began inauspiciously, however, as the S&P 500 fell 1.2 percent on Tuesday in a holiday delayed reaction to the rejection of Italy’s proposed coalition government. But stocks went on to recover, as the newly constituted coalition government proposal was ultimately accepted. Stocks added to their gains on Friday following a better than expected labor report for May.

Investors Pay Close Attention to Turbulence in the Eurozone


European politics is back in the headlines. It has been three years since the final stages of the Greek debt crisis. It has been two years since Brexit. It has been a year since the French elections, and nine months since the German elections. Each of these events raised investor anxiety over the spread of populist sentiment, including euro skepticism. And each time, that anxiety subsequently receded as the worst fears of each outcome were mostly avoided.

Investors Take Note of Consumer Spending


Stocks struggled last week, unable to overcome a further rise in bond yields that was triggered, in part, by some otherwise good news from the consumer sector. The S&P 500 index fell 0.5 percent, as stocks failed to build on the strong gain from the week prior. The yield on the ten-year Treasury note ended closed at 3.06 percent, higher by nine basis points, but reached 3.11 percent on Thursday, its highest level since the summer of 2011. The dollar index (DXY) also surged higher by 1.2 percent. Not surprisingly, rate sensitive utility and real estate stocks suffered sharp losses.