July 20, 2017

Financial Markets

  • In a continuation of first quarter results, equity markets around the world rallied boosted by improving economic activity and higher corporate profits.  Several equity indices set new all-time highs.
  • A sharp sell-off began abruptly on June 16 in large U.S. technology stocks that had been the top performers for the year up to that point.  Investors rotated into stocks that had been lagging, such as financials.
  • Bond yields traded in a tight range so returns were modest.  The spread between long-term and short-term U.S. Treasury bonds narrowed, which some investors see as a warning that economic momentum may be slowing.
  • Commodities was the only asset class to decline due to high supply levels pressuring prices – especially for oil.

Overview of the Economy

  • Economic growth moderated in the U.S. and China but strengthened in the eurozone and Japan.
  • Employment trends continue to improve in many regions including the U.S., the eurozone and Japan.
  • Inflation surprised to the downside with lower reports in the U.S., Europe, Canada, and India.

Notable Events

  • The U.S. Federal Reserve Open Market Committee (Fed) raised its federal funds rate by 0.25%.
  • Fed, European Central Bank (ECB), Bank of England, and Bank of Canada officials rattled markets late in the quarter with comments suggesting the era of extraordinary stimulus measures that have been in place since the financial crisis may be starting to end.
  • United Kingdom (UK) and French election results signaled less support for populist policies.


For an in depth analysis of the quarter, please download the PDF.