Monthly Global Market Commentary May 14, 2018

Last week ended strong with the S&P 500 up 2.49% and the MSCI World Index up 2.15%. They were largely driven by gains in Energy, Information Technology, Financial and Industrials. Much of the news was dominated by President Trump following through on his campaign promises.

The Iran Deal

President Trump exited the Iran deal on Wednesday. While this is in line with Trump’s campaign promise, it is a violation of the agreement struck since Iran has been adhering to the rules. The remaining partners (Russia, China, and the EU) are working to improve the terms in order to entice Iran to continue to adhere.

This is expected to raise tensions between the US and the remaining partners as the US is threatening to impose penalties on foreign companies that continue to deal with Iran. News of the US departure led to a spike in oil prices (lifting the energy sector) as the global supply chain will likely need to adjust. Utilities fell on the news.

Drug Price Cuts

The Trump Administration released details on the American Patients First policy on Friday. This is part of President Trump’s push to deliver on campaign promises (coincidentally, “Promises Kept” was unrolled as the new campaign platform). The United States pays a disproportionately high amount on healthcare. This has been justified in the past showing the relative strength of emergency healthcare and lower wait times in the US. There are growing concerns over the sustainability of this model with an increasingly ageing populace (historically, a larger voting block).

Some key takeaways are that the Department of Health and Human Services (HHS) will take steps to increase pricing competition through the use of generics. The below chart is a little dated but it shows the impact on price when generics are introduced into the market.



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