Macro Overview – June 2017
Political turmoil was not able to derail market momentum in May as the three major market indices continued on their upward trajectory. Delayed passage of stimulus driven legislation is reducing inflation expectations as markets anticipate an extended low rate environment.
The Federal Reserve Bank of Atlanta’s closely watched GDPNow forecast model is predicting second quarter economic growth of 3.4%, a generous number. The equity market’s rise is broad with small, mid, and large capitalization stocks all rising in tandem, a healthy dynamic as noted by most analysts. As inflation expectations have fallen, the equity markets have been rising in hopes of a slower process of increasing rates by the Fed.
Globally, the price of commodities such as iron ore, copper and oil have fallen since the beginning of the year. A weaker dollar is also buoying emerging markets as their currencies rise to fend off inflationary pressures in emerging market economies. Changes in banking rules and regulations may be in the air as the Trump Administration made its first major regulatory change, replacing the head of the Comptroller of the Currency, the banking industry’s primary regulatory entity. Download June 2017