CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY
January 13, 2020
Global Markets: Iran tensions, economic data drive markets on the week
• Geopolitical tensions between the US and Iran continued to flare up, causing markets to gyrate, with risk-on ultimately prevailing by Friday. Iran fired ICBMs on US military bases in Iraq on Tues, but tensions eased on Thurs after Trump commented that Iran “appears to be standing down.” Economic data for Dec was mixed, including ISM Services index, which hit a four month high, and the Dec nonfarm payroll report, which disappointed at 145k after a downwardly revised 256k gain in Nov. The unemployment rate remained at 3.5%
• Equities ended close to record highs with S&P 500 up +0.9%, the DJIA up +0.7%, and NADAQ at +1.8%.
• Treasuries lost -0.21% on the week as 2s30s bear steepened +2 bps to 73 bps. Treasury yields on the week: 2yr up +4 bps(1.58%); 5yr +6 bps (1.65%); 10yr +5bps (1.84%), 30yr +6 (2.30%).
• Fed funds futures indicate a ~80% chance of a -25 bps cut by the end of 2020...
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SAMUEL A. RAMIREZ & COMPANY, INC.
QUARTERLY MACROECONOMIC OUTLOOK
FINANCIAL STRATEGIES GROUP – 4th QUARTER 2019
Please find attached Ramirez & Co.’s Quarterly Macroeconomic Outlook. In our report, we continue to monitor the US economy, global events and the Fed’s outlook on the economy and rates:
- The global economy is still growing, but decelerating. The IMF slashes its global growth forecast to 3%, the Fed expects that US growth would moderate to its potential rate of around 2% minus, and Europe is stuck at 1% plus.
- US-China trade tensions and geopolitical risks seem to be the main drivers affecting sentiment, declines in global trade, business investment and manufacturing output. Though consumers are still feeling robust, they may eventually feel the pinch.
- Unlike the 2007-2009 contraction, there is not much central banks can do about our current predicament, regardless of how hard they may try. The answers will have to revolve around fiscal and trade policies. Nonetheless, the Fed, the ECB and other central banks are on a loosening policy stance, largely as insurance policies. With global assets bearing negative interest rates exceeding $15 trillion, interest rates are likely to move along a soft path – unless the global economy heats up.
Members of our Financial Strategies Group, Niso Abuaf, Konstantin Semyonov and Duncan Sinclair, would be happy to discuss further any of the material with you.
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