Announcements by government officials led market news last week. The Fed announced another rate hike, a judge approved the AT&T-Time Warner merger, and the Trump administration announced sanctions against Chinese goods. The net impact on markets was minimal. The S&P 500 was basically unchanged. The global MSCI ACWI dropped 0.4%, and the Bloomberg BarCap Aggregate Bond Index rose 0.1%.
Key points for the week
- Fed raises rates and signals more to come.
- AT&T-Time Warner merger is approved, indicating a flexible approach by the courts.
- Trade concerns continue to increase.
On Wednesday, the central bank raised the benchmark interest rate by a quarter of a percentage point to a range of 1.75% to 2%. The much-expected rate hike and announcement also included information suggesting Fed governors are more inclined to raise rates two more times this year. Markets reflected the news as federal funds futures went from a 50% to 58% likelihood of two more rate hikes before year’s end. If both increases are implemented, they would push interest rates up to a range of 2.25% to 2.5%. One more rate hike has been fully priced into the market for quite some time; however, two increases have not been. The accompanying chart shows the two-year Treasury yield, which indicates interest rate hikes push rates higher.
Source: www.Bloomberg.com June 2018
AT&T completed its acquisition of Time Warner Inc. just two days after a federal judge ruled against the U.S. Department of Justice’s attempt to block the deal. The DOJ could have appealed but decided to allow the merger. The ruling shows the court’s willingness to allow large players to shift their business models for the future, which is changing rapidly for many industries, particularly media and entertainment. The news quickly made the battle for 21st Century Fox’s assets more interesting. Both Comcast and Disney are expected to bid aggressively as the entertainment industry adjusts to confront the threats of Netflix and other disruptors.
A year after an assassination attempt against the U.S. House GOP baseball team left him badly wounded, Congressman Steve Scalise returned to this year’s game against the House Democrats and successfully threw out the leadoff batter at first base. Never had both teams been happier for an out to be recorded in a game.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.