Week in Review: Trump Agenda Likely Delayed Further
For the week ending 19 May 2017
- Special counsel appointed in Russia probe
- UK’s May unveils election manifesto
- Merkel’s prospects bright after state elections
- Corruption scandal touches Brazil’s president
Global equities saw little net change this week, but there was a good bit of volatility midweek as political chaos intensified in Washington. The yield on the 10-year US Treasury note fell to 2.25% from 2.34% a week earlier while West Texas Intermediate crude oil rose to $50.30 a barrel from $47.50 last week amid signs OPEC and major producers such as Russia will retain output curbs through March of 2018. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), jumped as high as 15.50 at midweek before slipping to 11.90 on Friday. The week began at a placid 10.80.
GLOBAL MACRO NEWS
Trump visits allies as pressure builds at home
US president Donald Trump embarked on his first overseas trip as president today, leaving behind a swirl of controversy in Washington. Trump will visit Saudi Arabia, Israel and the Vatican before a stop in Sicily for the G7 summit. On Wednesday, the US Department of Justice appointed former FBI director Robert Mueller as special counsel to investigate Russia’s intervention in the 2016 presidential election as well as any improper contact between Russian agents and the Trump campaign. Revelations that Trump disclosed extremely sensitive intelligence to the Russian foreign minister and ambassador during an Oval Office visit last week added to the firestorm.
Tory platform says no Brexit deal better than bad one
UK prime minister Theresa May unveiled the Conservative Party manifesto on Thursday, setting the stage for the general election on 8 June. On Brexit, the manifesto says that no deal is better than a bad one and that the United Kingdom seeks an agreement with the European Union that would take the UK out of the single market and customs union but continue close ties through a comprehensive trade and customs agreement. Meanwhile, the UK this week reported that its unemployment rate stands at 4.6%, its lowest level since 1975.
Merkel’s party flexes muscles
German chancellor Angela Merkel’s party, the Christian Democratic Union, has performed extremely well in German state elections in recent months. This potentially paves the way for Merkel to retain her post when Germany holds federal elections in late September. The CDU won the regional vote in Germany’s most populous state, North Rhine-Westphalia, last weekend, unseating the Social Democrats in state elections for the third time since March. Earlier concerns over Merkel’s unpopular immigration stance appear to have faded amid a solid German economic recovery.
Brazil’s Supreme Court authorizes Temer bribery investigation
Brazilian president Michel Temer, who came to office after the impeachment and removal from office of his predecessor, Dilma Rousseff, was placed under investigation by the nation’s Supreme Court this week after allegations surfaced that Temer was taped condoning the bribery of a witness in a major corruption scandal. Temer, in a nationwide address, vowed not to resign, saying he did not buy anyone’s silence. In the wake of the allegations, stocks and the Brazilian real both plunged on fears the recent economic rebound could stall amid fresh political uncertainty.
Macron appoints center-right PM, pledges to overhaul Europe
After being sworn in on Sunday, French president Emmanuel Macron on Monday appointed Édouard Philippe as prime minister. Phillipe is a member of the Republicans, and his appointment is an effort to woo support from the center-right in case Macron’s En Marche! party fails to secure a majority in next month’s parliamentary elections. Later in the week, during a meeting with European Council president Donald Tusk, Macron vowed to work for the overhaul of Europe. Tusk praised Macron, saying Europe needs his energy, imagination and courage.
Japan’s growth picks up steam
Japan’s economy grew 2.2% in the first quarter of the year, its fifth straight quarter of growth, the longest string of gains in over a decade. Exports and domestic demand were both solid.
As of 17 May, with 458 companies in the S&P 500 Index having reported, Q1 earnings are expected to increase 15% from a year ago. Excluding energy, earnings are seen growing 10.7%. Revenues growth is estimated at 7.2%, falling to 5.3% ex energy.
THE WEEK AHEAD
- Flash manufacturing purchasing managers’ indices are released globally on Tuesday, 23 May
- The Bank of Canada meets to set interest rates on Wednesday, 24 May
- The minutes of the US Federal Reserve’s Federal Open Market Committee meeting are released on Wednesday, 24 May
- Preliminary UK gross domestic product data are released on Thursday, 25 May
- Preliminary US GDP data and durable goods orders are reported on Friday, 26 May
- The G7 summit begins in Taormina, Sicily, on Friday, 26 May
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 News; Financial Times; Forbes.com; CNNMoney.com; NBCNews.com.
Issued in the United States by MFS Institutional Advisors, Inc. ("MFSI") and MFS Investment Management. Issued in Canada by MFS Investment Management Canada Limited. No securities commission or similar regulatory authority in Canada has reviewed this communication. Issued in the United Kingdom by MFS International (U.K.) Limited ("MIL UK"), a private limited company registered in England and Wales with the company number 03062718, and authorised and regulated in the conduct of investment business by the UK Financial Conduct Authority. MIL UK, an indirect subsidiary of MFS, has its registered office at One Carter Lane, London, EC4V 5ER and provides products and investment services to institutional investors globally. This material shall not be circulated or distributed to any person other than to professional investors (as permitted by local regulations) and should not be relied upon or distributed to persons where such reliance or distribution would be contrary to local regulation. Issued in Hong Kong by MFS International (Hong Kong) Limited ("MIL HK"), a private limited company licensed and regulated by the Hong Kong Securities and Futures Commission (the "SFC"). MIL HK is a wholly-owned, indirect subsidiary of Massachusetts Financial Services Company, a US based investment adviser and fund sponsor registered with the US Securities and Exchange Commission. MIL HK is approved to engage in dealing in securities and asset management regulated activities and may provide certain investment services to "professional investors" as defined in the Securities and Futures Ordinance ("SFO"). Issued in Singapore by MFS International Singapore Pte. Ltd., a private limited company registered in Singapore with the company number 201228809M, and further licensed and regulated by the Monetary Authority of Singapore. Issued in Latin America by MFS International Ltd. For investors in Australia: MFSI and MIL UK are exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 in respect of the financial services they provide to Australian wholesale investors. MFS International Australia Pty Ltd (" MFS Australia") holds an Australian financial services licence number 485343. In Australia and New Zealand: MFSI is regulated by the US Securities & Exchange Commission under US laws and MIL UK is regulated by the UK Financial Conduct Authority under UK laws, which differ from Australian and New Zealand laws. MFS Australia is regulated by the Australian Securities and Investments Commission.