Jay Powell’s first public utterances as the new Federal Reserve chair, in which he talked up the US economy and suggested a faster rates cycle, have bolstered the recent revival in the sorry-looking dollar. After years in which the Fed’s actual rate rises have failed to match its projections, investors now face the prospect that 2018 may result in the central bank not just meeting its current forecast of three rate rises, but exceeding it. The Powell Fed will have a little more tolerance for market volatility than the last two Feds, not so much because of a difference in background or philosophy, but more as a function of where we are in the cycle. In his latest letter to investors, Warren Buffett (87 years old), it became clear the fund is piled with cash due to the reason Buffett can't find good, and more importantly, companies for a reasonable price. His fund now has over 100 billion dollar in cash. 2017 was a good year for Berkshire, partially due to the tax reforms of Trump which gave the fund a boost of $29 billion. The share price of Berkshire Hathaway, valued at $500 bln, rose over 25% last year, a little more then the broad S&P 500. Last year Trump withdrew the United States from the Trans Pacific Partnership. Today the new terms were published of the partnership and all former wishes from the US were deleted. The agreement between the 11 countries around the pacific, including some fast growing 'emerging markets' and leader Japan, could be in place and be signed the beginning of March. It will remove barriers of trade, as well as several tariffs between countries which together produce around 15% of global GDP. The 11 counties, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Signapore and Vietnam, all have firm believe this deal will boost their economy. It doesn't come as a surprise but over 90% of worldwide asset managers are underweight government bonds within their portfolios. With bond rates slowly rising, as well as inflation creeping up, it seems the right call to be underweight. Other results in this survey show that risky assets are still overweight, with European stocks in front. It will be cold and colorful, dramatic and dangerous, exciting and emotional -- the 2018 Winter Olympics is set to burst into life in South Korea. The opening ceremony was full of pride, passion, tradition and most probably a bit of politics will get the PyeongChang Games officially under way. Nearly 3,000 athletes from 93 countries are set to compete in a record 102 events across 15 different sports from February 9-25. France and Germany’s finance ministers and most senior central bankers have joined the chorus of politicians and regulators calling for a coordinated clampdown on bitcoin and other virtual currencies.Whilst a handful of smaller European banks are breaking ranks with the rest of the sector by giving investors access to cryptocurrencies and advising on initial coin offerings, despite an intensifying effort by regulators to clamp down on the area.
US Senate leaders have reached a bipartisan budget deal that would keep the government funded for two years, lifting the caps on military and domestic spending and promising an end to the budget crises that have dogged Congress. Investors piled into the perceived safety of US Treasuries and bet on a further ramp-up in equities market volatility amid ructions in the global financial markets. The CBOE volatility index (Vix), which measures implied volatility in the S&P 500 over the next month, rocketed past 50 for the first time since August 2015, from under 14 at the end of January. The gauge has averaged about 20 since 1990.
US Federal Reserve rates stay on the current range of 1.25%-1.50% in the last official meeting of Yanet Yellen. New FED chairman Powell was officially elected as well during this meeting. Future rate hikes become more probable as the inflation expectations have agressively moved up to the 2% mark. Analysts expect 3 to 4 rate hikes in 2018, to well above 2% for the short term interest rates. Longer rates, like the 10Y US, has been on the rise since September 2017 and is moving towards 3%. |
PurposeMajor markets news headlines which captured the markets. Archives
March 2021
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