October 2, 2017

commodities-storming-back-into-bull-market

Weekly Market Commentary
October 2, 2017

The Markets

A lot happened during the third quarter of 2017, but not much changed.

The bull market in U.S. stocks continued to move ahead as the fundamentals stayed steady.

The bull market in U.S. bonds continued as well. Interest rates on 10-year Treasury bonds were lower at the end of September than they were at the start of the year, despite the Federal Reserve increasing rates in March and June. The Fed also has indicated it will soon begin to unwind its balance sheet, which includes about $4.5 trillion in Treasury bonds, mortgage-backed securities, and government agency debt.

Geopolitical tensions remained high, but investors were impervious to the potential effect of various conflicts on stock and bond markets. In August, Barron’s wrote:

“The biggest surprise of 2017 remains that geopolitical risk continues to not matter. Until Monday, North Korea’s nuclear missile program had again faded into the background as just another high impact/low probability risk with no discernible effect on market sentiment. Brexit, the changes in leadership roles in China after the 19th National People’s Congress, the possibility of a United States-China trade war, and the unpredictable nature of the Trump presidency are not weighing on stocks.”

The Fed’s goal is to have inflation at 2 percent. It has raised rates during 2017 in anticipation of higher inflation rates, but those higher rates have yet to materialize.

Focus On The Positive

“A true friend never gets in your way unless you happen to be going down”
— Arnold H. Glassgow

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