Investors continued to shy away from risk assets throughout the week as global shares hit a six-week low before regaining some ground on Friday. Money has flowed out of equities for the sixth straight week according to Bank of America and flocked to defensive investments such as REITs.
The release of minutes from the last Federal Reserve meeting stirred various markets. Commentary from Fed officials suggests a June rate hike is a firm possibility, even though futures markets still only put an approximate 30% probability of an increase. Stocks sold off, the dollar rose and the yield curve flattened on the news.
The House reached a deal to offer a means for Puerto Rico to restructure its debts without granting federal funds to the territory. The bill would create a control board to manage the process.
Goldman Sachs downgraded its outlook for stocks to neutral over the next 12 months. The bank articulated that there are few reasons to feel comfortable with risk assets, preferring to see more robust growth signals at a time where valuations are at peak levels.
The IMF is pushing a plan to let Greece skip paying interest or principal on loans until 2040. In addition, the plan would fix interest rates at 1.5%. The deal is far more lenient than many Eurozone governments would prefer but IMF involvement is strongly desired to lend credibility to any new aid package.
The market’s view of Nigeria’s economy took a rapid downturn this week. Forward currency contracts are estimating a 27% depreciation in the next three months, up from 7% a week ago. Nigeria’s economy has been decimated due to low oil prices, terrorism, and currency mismanagement.
Venezuela’s economic suffering continues to mount after President Maduro implemented a State of Emergency last week. Shortages for basic goods, a drought, and protests have resulted in inflation rates over 700% according to the IMF.