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Weekly Economic Review – Relative Stability in The Stock and Bond Markets Worldwide


The stock market was trading this week in a mixed trend with a tendency to declines. The government bond market was positive.

The leading indexes in the US were trading in slight declines, the Nasdaq lost 0.6%, and the S & P 500 fell 0.3%. The Dow Jones Industrial Average rose by 0.2%. European indices fell by an average of 0.3%. The emerging countries’ index rose by 0.3%.

The 10-year US government bond yield fell from 2.39% to 2.38%. The bond price rose by 0.2%, a similar trend in Britain and Germany.

The real economic indicators published in the US were mixed with a slight positive trend The ISM activity index was positive and above expectations The unemployment rate in the US fell from 4.7% to 4.5% Hourly wages rose by 0.2%, in line with expectations of inconsistent data In addition, there was a negative trend (an increase in employment was reported in March was 98,000 and the forecast of 180,000), but the labor market data published on the weekend are not as weak as at first glance and an inward look shows that the US labor market is still strong, which means that the interest rate will continue to rise, and therefore it is too early to run away

The Fed actually announced a reduction in the monetary rate, a plan to sell bonds to reduce the amount of money in the economy, and expectations of a certain acceleration in interest rate increases.

Britain begins with the Brexit. Relatively weak industrial production data were published there.

The price of a barrel of oil rose by 0.3% this week. The commodity price index rose by 0.7% this week. The price of the ounce of gold rose by 0.4% this week. The dollar traded 0.8% higher against the currency basket

The positive meeting between Trump and China’s president, along with Nun’s removal from the National Security Council, attests to an expected improvement in the president’s functioning.

Conclusions

Global stock markets mostly embody the current pricing of “good news”, among others, against the background of economic viability and companies. However, the number of challenges currently facing in 2017, including: pricing is not cheap, uncertainty around policy trump, elections in France and Germany, possible deterioration in the political situation in Italy and the return of the Greek debt crisis headlines.

This, combined with the effect of monetary tightening is expected in the US currency basket, the era of expansions in Japan and Europe, supported adopting a conservative approach

Consumer Discretionary (XLY)- In view of the increase in income disposable light of the planned reform of the individual income tax.

Energy (XLE) – In view of the removal of environmental regulation, and support activities Locally.

Finance (VFH) – In view of the credit growth, net interest income, operating expense structure and quality of credit portfolios that show consistent improvement. Easing regulation of the financial system, improving consumer sentiment, an expected reduction in corporate and income taxes, disposable income and the improvement in revenue funding as a result of the increase in interest rates, supports in investment in the financial sector to the near future.

Technology (QQQ, VGT, FDN) – In light of conflicting effects on the bottom line of corporate tax reduction, on the one hand, and increasing regulatory supervision of the sector, on the other.

Healthcare (XLV) – In light of supportive trends such as the aging of the western population and an increase in healthcare spending, reasonable pricing (a predicted P/E of 16.2, lower than that of the S&P500)

MSCI Europe (hedged) – In view of the Encouraging news in the Eurozone on both the economic and political fronts, an expansionary monetary policy, relatively convenient pricing, which represents a better starting point for investment than the US, focusing on export-oriented indices and sectors that are expected to benefit from the weaker euro’s impact on profit. (DBEU).

Germany (hedged) – In view of the increase in revenues of export-oriented light of the weakness of the euro against the dollar (DXGE).

UK (hedged) – In view of the interest rate cut and positive growth and postponement of exit from the block will benefit private spending of leisure (DXPS).

Nikkei2225 (hedged) – In view of the monetary and fiscal expansion parallel to support the weak currency profits of exporters (DXJ).


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