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Weekly Economic Review – The Most Successful Quarter Since the End of 2015


Leading US stock markets ended the most successful quarter since the end of 2015. More than 350 stocks in the S & P 500 index gained gains by 1Q / 17, as the gains that began with the election of the US President Trump on 8/11 have since ballooned to 14%.

The indices in Europe rose by an average of 1.65%. The average index of the emerging countries bloc fell by 1.1%. The global average share index rose by 0.3% this week and rose by 6.4% in the first quarter.

US government bonds rose this week. The yield on 10-year bonds fell from 2.45% to 2.39%, a similar trend seen in Britain and Germany, and since the beginning of the year, government bond indices have been stable.

The real economic indicators continue to be positive across most of the world. This week, the US benefited from very good data and above expectations in real estate (the Kais Schiller indices), the Purchasing Managers Index (Chicago) and the consumer confidence index, good indices and In accordance with expectations were in the area of consumer spending.

Very good data was also published in Germany (mainly retail sales and employment) and in the UK, a growth of 1.9%.

Trump continues to try to pass his political economic policy, signs orders to cancel the national effort on pollution and the environment, fails to pass an updated health law, unsuccessfully demands a huge payment from Germany for NATO’s expenses, is expected to introduce his tax reform soon.

Its success will accelerate optimism in the stock market, failure will lead to falls in the stock market, tax cuts are expected to increase companies profits.

The price of a barrel of oil rose this week by 5.5% and fell by 5.8% since the beginning of the year.

The commodities price index rose by 1.3% this week and fell by 3.4% since the beginning of the year.

The price of the ounce of gold rose by 0.5% this week and rose 8.4% since the beginning of the year.

The dollar traded at a 0.7% rise against the currency basket and fell 1.8% since the beginning of the year.

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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