Market Action

  • Risk assets returned most of their gains from the past week as earnings season is set to pick up momentum. Analysts are estimating that earnings will fall 9% over last year’s level and hope that it marks a trough in the corporate sector.
  • Safe havens were in high demand this week. Yields fell on both benchmark Treasury and investment grade bonds while the Yen reached its strongest level against the dollar since October of 2014. The rally in the Japanese currency has contributed to the Nikkei losing more than 7% in the past 2 weeks. Japan has vowed to intervene if the moves continue.
  • The World Trade Organization lowered its expectations for global trade growth from 3.9% to 2.8% this year citing weakness in China and market volatility as hurdles to demand. The Baltic Dry Index, a measure of trade activity, is at its highest point of 2016.
  • Puerto Rico’s Governor signed an emergency bill this week that would suspend debt payments for the rest of the year. The bill signals the increasingly desperate situation the island is currently in and reverses recent optimism that a restructuring will be soon completed.
  • The Department of Labor announced new rules for financial advisors. Professionals will now have to adhere to a fiduciary standard with their client’s assets, as opposed to simply allocating capital towards suitable investments. The new rules go into effect next spring and represent some substantial compromises from the government after receiving public feedback.
  • In other regulatory action, the Treasury Department toughened rules to stifle corporate inversions. The new rules include restricting internal company loans that are used by firms to reduce taxes via interest expenses. Allergan and Pfizer called off their merger a few days after the rules were announced.
  • Oil rose by 8% this week as data out of the U.S. continues to show declines in production in the wake of crude’s fall. The oil rig count has fallen by roughly 10% over the past year.

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