Global Markets Continue to Rally

Global markets continue their rally into the New Year. The S&P 500 ended the week up 1.99% while the broader MSCI World Index gained 1.61%. Gains in the MSCI World Index were largely centered around North America, Africa and the Middle East as tensions of an open regional war appeared to diminish.

Articles of Impeachment Move to the Senate

The US House of Representatives delivered the articles of impeachment to the Senate during a staged ceremony. This is expected to end in an acquittal as Republicans have remained unconvinced that the impeachment was not a politically motivated act. An unexpected consequence of the Senate trial will be that Democratic Progressive front-runners Senators Bernie Sanders and Elizabeth Warren are required to be physically present in Washington to act as jurors. This could potentially limit their ability to campaign prior to the February 3rd Iowa Democratic caucus. Joe Biden is the current front runner.

Conflict in the Middle East

Over the weekend, the Iranian government admitted to erroneously shooting down a civilian flight to Ukraine after video evidence emerged. Public outrage in Iran over the assassination of Soleimani has shifted to anger with the cover-up. Iran has since cracked down on the protests, arresting 30 individuals for illegally gathering. Iran’s Supreme Leader Ayatollah Khamenei has come out in support of the military.

In related news, the US military has acknowledged 11 US service members were injured during the Iran missile attack on US-bases in Iraq. This contradicted earlier statements from the White House that no injuries had occurred. The attacks were in response to the Soleimani killing. Markets appear to be unphased by this news.

Earnings Season

In more positive news, earnings season kicked off with most banks beating expectations. While the top and bottom-line performance was largely positive, the individual stock performance was muted. Of the laggards, the Bank of New York interim CEO cited “lower rates, a flat yield curve and low foreign exchange volatility” as the key headwinds.

Yield Curve Steepens

The US Treasury announced that it would start issuing 20-year bonds in the first half of 2020. The Treasury Department is expecting strong demand for the securities as institutional investors have limited opportunities for positive yields in government securities on a global basis. The Street is expecting the yield curve to steepen on the news. For now, the response has been muted, with 30-year Treasuries gaining a little under 3 basis points but remaining slightly down from a month ago.

Download the PDF article.

The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.