Will Tariffs Nip the Tip of the Tax Cuts

 We have a big week ahead with the summit between Kim Jung Un and President Trump. The Federal Reserve, Bank of Japan and ECB are also all meeting. Additionally, investors will be watching the latest headlines from the week of G7 meetings. On the economic calendar, we have CPI, Retail Sales and PPI.

 

North Korea: On Tuesday (6/12), the summit between North Korea’s leader Kim Jung Un and President Trump is set to take place in Singapore. Headlines out of the summit could potentially move markets. If things go well, the market could rise. If it all goes to crap, the markets could fall sending investors into safe havens such as Treasury’s, Gold and the US Dollar. Oil could go up also. Currently Kim Jung Un is staying at a hotel on Orchard Road. If he stops at nearby Orchard Towers beforehand, the summit will likely go positively.

Federal Reserve: On Wednesday (6/13), the Fed will release a statement where everybody will be waiting to see if the Federal Reserve decides to raise interest rates again. The announcement will also be followed up by a press conference. Right now, the markets ae expecting the Fed to raise rates if we have any chance of 4 rate hikes this year. So far we have only seen 1 rate hike back in March. If the Fed does raise rates for the second time in 2018, we can expect to see significant volatility following the statement release. Some of the results of an interest rate increase include a strengthening in the US Dollar, a spike in Utilities & Financial companies, a weakening of foreign currencies, oil and metals. We would also see mortgage rates go up as Treasury yields will increase. No matter what happens, savings rate at the banks will still stay at .001%.

CPI: Also on Tuesday (6/12), CPI is released. Should CPI come in stronger than expected, it would signal that the consumer is not be affected by the higher oil prices or the potential tariffs on certain products. If it comes in weaker than expected, investors will blame companies in fear of the tariffs.

Italy: The society that brought us the Roman Empire now can’t form a government or come to unity with its surroundings (the European Union). Investor’s will be watching the latest headlines as they try to form a government. The more Euro centric picks in the government, Italian yields will drop and the Euro will get stronger. If they pick representatives that would ultimately leave the EU, expect the Euro to drop and Italian yields (especially short term ones) to rise.

ECB Press Conference: On Thursday (6/14), Super Mario will have a press conference on the ECB’s latest efforts to end their bond buying program (No more free money). Any pull back or exiting announcement would see a strengthening of the Euro and see Euro stocks rise as they feel confident they can stand on their own 2 feet. If the markets believe they can’t stand on their own with an announcement of the ending of bond buying, expect stocks to fall.

Bank of Japan: On Friday (6/15), the Bank of Japan will release a policy statement followed by a press conference. Right now, the BoJ is considering cutting inflation forecasts. However, with the BoJ continued to buy Japanese government bonds, we are likely not to see a strengthening of the Japanese Yen any time soon.

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