X Weekly Market Commentary June 18, 2018
Posted on June 18, 2018

Weekly Market Commentary June 18, 2018

Market Commentary

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.

Economic News

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: June 2018

Corporate News

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.

Fun Story

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.