Market Commentary, June 2018

June 7, 2018

As expected, the fed raised interest rates by 25 basis points (.25%) citing strong data in unemployment, wages and home purchases. However, we don’t anticipate them to increase the pace at which they rise in the future. With inflation numbers still hovering at or below 2 percent, it seems likely they’ll proceed without added pressure to keep prices under control.

President Trump implemented the tariffs he’s been talking about for some time – imposing a 25 percent import tariff on steel and 10 percent on aluminum. As expected, it resulted in a tit-for-tat trade battle. We were optimistic that strong initial conversations would lead to negotiation, but alas, retaliation appears more likely:

  • Mexico has retaliated with its own 10 percent tariff on pork exports, which is expected to increase to 20 percent in June.
    • This could cost pork farmers at least $360 million, according to the Iowa Farm Bureau.
  • Canada and the E.U. are also considering retaliatory tariffs or legal action.
  • Trade Partnership, a “non-partisan” research firm based in Washington, D.C., estimates that 16 jobs will be lost for every job gained primarily due to retaliatory tariffs and increased manufacturing costs. That equates to roughly 400,000 lost jobs.

In better news, however, May was a big month for tech giants like Facebook, Microsoft and Apple with the Nasdaq touching all-time highs for the tech sector. Although tech has been a volatile space historically, some have started to argue it’s become a more defensive sector over the past few years. We’re not willing to go that far, but with trade fears top-of-mind, money continues to flow into tech.

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Blog by Andrew Gaskill, Financial Services Manager.

 

Sources:
https://www.cnbc.com/2018/06/13/fed-hikes-rate-by-a-quarter-point.html
https://www.bankrate.com/banking/federal-reserve/fomc-recap/
https://www.bankrate.com/banking/federal-reserve/fomc-what-to-expect/
http://money.cnn.com/2018/05/31/news/economy/united-states-steel-aluminum-tariffs/index.html?iid=EL
https://www.nbcnews.com/business/economy/mexico-will-impose-20-percent-tariffs-u-s-pork-n880176
http://tradepartnership.com/wp-content/uploads/2018/06/232RetaliationPolicyBriefJune5.pdf
https://www.washingtonpost.com/national/markets-right-now-tech-retailers-lead-gains-for-us-stocks/2018/06/04/80a75c06-680f-11e8-a335-c4503d041eaf_story.html?noredirect=on&utm_term=.134ca30dbf20
https://www.bnnbloomberg.ca/investing/video/is-tech-a-new-defensive-sector~1412716

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