MACRO NEWS

 

US House and Senate offer differing tax plans
The US House Ways and Means Committee, the tax-writing arm of the lower house, amended the tax reform proposal it put forth last week. The Senate Finance Committee unveiled its plan for the first time on Thursday. Among the key differences the two bodies will need to iron out is the effective date of the proposed corporate tax cut from 35% to 20%. In the House bill, the cut would go into effect next year, while the Senate’s plan calls for the cut to become effective in 2019. GOP leaders are under intense pressure to pass a tax bill before the end of the year after failing to enact any major initiatives during the Trump administration’s first year in office. 

 

Trade deals unveiled during Trump China visit
According to the White House, $250 billion in trade deals were agreed during US president Donald Trump’s visit to Beijing. Skeptics noted many of the announced deals were not contractual obligations and some may have been agreed previously. Despite the skepticism, some Chinese trade barriers appear to have been lowered, notably on the importation of US beef, which was halted in 2003 as a result of a BSE (mad-cow disease) scare in 2003.

 

Oil prices rise to two-and-a-half-year highs
Saudi Arabia’s crackdown on corruption, growing tensions between Iran and Saudi Arabia and the potential for a Venezuelan debt default all helped push oil prices higher this week. While short-term factors could push prices up in the near term, spare US production capacity could come back on line quite quickly, analysts say, limiting the market’s upside over the medium term.

 

NY Fed seeks new leader amid central bank turnover
The US Federal Reserve will have all-new leadership before long as Janet Yellen’s term as chair expires in February. Vice Chair Stanley Fischer resigned last month, and now New York Fed president William Dudley has announced that he too will step down in 2018. So far, markets seem unconcerned by the turnover at the top of the central bank now that President Trump has nominated Fed governor Jerome Powell to succeed Yellen as chair. This week, newly appointed vice-chair for bank supervision Randal Quarles spoke publicly for the first time, indicating that he believes the Fed should take a fresh look at post–financial crisis banking regulations.

 

China’s PBOC warns of high leverage
People’s Bank of China governor Zhou Xiaochuan warned again this week that his country’s financial system is becoming significantly more vulnerable because of high leverage. Risks are accumulating, the central banker bluntly warned, that are “hidden, complex, sudden, contagious and hazardous.” Zhou said China should open up markets, relax capital controls and reduce restrictions on non-Chinese financial institutions to counter the rise in leverage.

 

UK’s May weakened further by Westminster scandals
Already politically vulnerable owing to the Conservative Party’s poor showing in snap elections earlier this year and a lack of progress toward a controlled Brexit, British prime minister Theresa May found herself further weakened this week by a growing sexual harassment scandal that forced her defense minister Michael Fallon from office. Secretary of State for International Development Priti Patel was also forced to resign, for having undisclosed meetings with Israeli officials. With just weeks to go for the United Kingdom to come to a financial settlement with the European Union over Brexit, the sackings are seen as a major distraction. 

 

Investor sentiment remains elevated
Bullish sentiment has been running strong of late, and by one measure it is at its most elevated level in three decades. According to Investors Intelligence, 64% of newsletter writers were bullish this week, versus just 14% who were bearish. The spread between bulls and bears has been at an elevated level for six straight weeks. Another sign of market confidence is a record level of margin debt, according to the Wall Street Journal. Margin loans grew 14% from the end of 2016 through the end of Q3, the Journal noted.

 

EARNINGS NEWS

 

With 90% of the members of the S&P 500 Index having reported for the third quarter, blended earnings grew 6% versus the same quarter a year ago. Stripping out insurance companies, which were hit by hurricane claims, earnings rose 8.3%. Revenues rose 5.8% year over year.

 

THE WEEK AHEAD

 

Date

Country/Area

Release/Event

  Tue, 14 Nov

China

Retail sales, industrial production

Tue, 14 Nov

United Kingdom

Consumer price index

Tue, 14 Nov

eurozone

Q3 gross domestic product

Wed, 15 Nov

UK

Unemployment rate

Wed, 15 Nov

United States

Retail sales, Consumer Price Index

Thu, 16 Nov

UK

Retail sales

Thu, 16 Nov

eurozone

Consumer price index

Thu, 16 Nov

US

Industrial production

Fri, 17 Nov

US

Housing starts, building permits

Fri, 17 Nov

Canada

Retail sales, consumer price index

 

 

 

 

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

 

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any MFS product.

 

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual or quarterly report. Full holdings are also available on the individual Fund Summary tab in the Products section of mfs.com.

 

Past performance is no guarantee of future results.

 

Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg New; Financial Times; Forbes.com; CNNMoney.com; NBCNews.com.

 

This content is directed at investment professionals only.

 


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