Sunday, April 1, 2018

Investment Perspectives: Trade with China, LIBOR, and Continuing Volatility

This Investment Perspectives examines implications of the trade negotiations with China, increase in LIBOR, and persisting market volatility.

You can read the full Investment Perspectives here.

In this month's issue:

"China Syndrome"
Mark Luschini
In our Outlook 2018 publication, we identified two endogenous risks that could undermine our base case of positive, above-trend growth and a continuation of the bull market in equities. The first was an upside surprise from inflation. The second was a tit-for-tat retaliatory trade war, or even the sharpened threat of one, that could undercut the bullish sentiment elicited from the business community.

"LIBOR on the Move"
Guy LeBas
Short-term interest rates have been rising rapidly over the last three to four months, and the Federal Reserve (Fed) is only part of the reason. Since December, the Fed has increased overnight interest rates twice for a total of 0.50%, but a 3-month lending rate known as LIBOR has increased 0.85% over the same time period. While this comparison might appear to fall into the wide canyon of financial market esoteria, it has some important (and interesting) implications for the broader markets, and increases the value of an investment strategy that we at Janney’s Investment Strategy Group (ISG) have largely discouraged over the last several years.

"Trade, Turbulence, and Time"
Greg Drahuschak
Even the most casual observer last month could not miss the significance foreign trade issues had on the stock market and the substantially increased volatility they created.

Trade concerns held the equity market hostage through the last two months of the first quarter, reacting favorably and poorly, depending upon any given day’s trade news, which led to increased volatility.