October 17, 2017

Third Quarter Highlights

Financial Markets

  • Global equity markets continued to rally, boosted by improving economic activity and higher corporate profits. Several equity indices set multiple new all-time highs.  The emerging markets index was the top performer.
  • In a change, energy stocks were among the top performers this quarter. Technology stocks resumed their rally after a brief sell-off last quarter and remain the performance leader for the first three quarters of the year.
  • Bond yields declined for most of the quarter on safe haven trading in reaction to natural disasters, North Korea’s threats, and political rhetoric, but rose in September as central banks talked of tightening monetary policy.
  • The price of oil rose 12% since the end of June on higher demand and lower production. The U.S. dollar snapped its 2017 downtrend and rose 1% in September, but was down for the quarter and is down about 7% for the year.

Overview of the Economy

  • Economic growth, while at modest levels, has been widespread in developed and emerging countries due to increases in manufacturing production, service industry activity, and business investment.
  • Employment trends continue to improve in many regions including the U.S., the eurozone and Japan.
  • Inflation remains low in many countries due in part to subdued wage growth.

Notable Events

  • The U.S. Federal Reserve Open Market Committee (Fed) said it will begin unwinding its balance sheet in October and still is projecting one more rate hike in 2017 and three in 2018.
  • A framework for tax reform in the U.S. was introduced that proposes to cut the corporate tax rate to 20% from 35%, reduce the individual tax brackets to three from seven and lower the top rate to 35% from 39.6%, eliminate the alternative minimum tax, and simplify the tax code. The initial market reaction was positive.

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