Asset Class Reports
Canterbury's Outlook: Second Quarter 2018
Economic Growth Amid Trade War Rhetoric
- The economy has continued to see improvement. Job growth is strong, inflation is nearing the Fed’s target level, and a summit with North Korea provided relief for the markets as global political tensions eased. However, trade wars and the potential retaliatory efforts by other countries dominated headlines and ultimately effected risk markets.
- U.S. equities gained 3.9% in the second quarter coming off a negative start to the year when volatility increased and inflation concerns loomed. Despite positive earnings growth and consumer sentiment, international developed equities and emerging markets equities were both negative for the quarter as a strengthening US dollar hurt performance and trade war fears shook the markets.
- U.S. core fixed income experienced pressure as the Fed decided to hike interest rates for a second time in 2018. Moreover, the group revised 2018 forward interest rate guidance from three hikes to four hikes. Investment grade corporate credit remained challenged as higher interest rates led to wider spreads. Below investment grade bonds performed well as the credit markets remained stable.
- Oil prices moved higher during the quarter as turmoil in Venezuela resulted in lower-than-expected production. Proposed U.S. sanctions on Iranian oil reduced expected supply, which also put upward pressure on prices.
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