Rietumu Asset Management experts: “Markets on Unstoppable Rally”
04-Dec-2017, 17:11 / Products & Services The specialists of Rietumu Group have prepared an overview on the return of the investment funds of Rietumu Asset Management (RAM) for November.
Along with information on the structure and dynamics of the funds, the review contains the traditional analysis of the current political events and key economic factors that exert an influence on financial markets.
“The S&P 500 index's bull market is the second-best performing in the modern economic era behind the bull market from October 1990 to March 2000. Furthermore, it has all chances to become the best performing. Outstanding consumer confidence and strong labour market across the world, solid financial results from public companies and low interest rates almost warrants this,” say RAM experts.
At the beginning of November, US high yield bonds had a minor correction that increased yield on speculative financial instruments. It’s worth mentioning that the correction happened due to a low risk premium, and not due to the higher credit risk.
In the middle of November, the House of Representatives has agreed upon their version of the tax reform in the US. The Senate will begin its consideration of their version after Thanksgiving. The House and Senate must pass identical legislation before sending to the President for signature. So far the versions have several differences. Financial markets are positive on perspective of the tax reform, despite that majority of economists agree upon that the reform will not sustainably raise economic growth rate.
Majority of the public companies have reported third quarter results by the end of November. S&P 500 companies have reported various positive EPS surprises, good profit and revenue growth. Top performing sectors were energy and technology. However, investors were reluctant to award positive surprises and were quick to punish for negative surprises.
On the other side of the Atlantic Ocean, STOXX 600 companies showed good revenue growth and mediocre earnings growth. “The energy sector had the highest earnings annual growth rate for the quarter, while the financial sector had the weakest. It’s worth mentioning that both investors and business in Europe are optimistic about future perspectives,” note RAM experts in the review.
Oil prices increased due to higher risk of destabilization in the Arabian Peninsula (many viewed an anti-corruption probe in Saudi Arabia as a consolidation of power of the Crown Prince Mohammad bin Salman). Also, Keystone pipeline, a major pipeline in the U.S. with a carrying capacity 590 000 barrels a day, shut down contributed to the higher prices.
The review on RAM and the current comments of the specialists can be found here.
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