June Market Note

June 12, 2018

This month we wanted to share a piece with you written by our fellow Investment Committee Member Scott Welch, CIMA®, Chief Investment Officer of Dynasty Financial Partners.

Things just got interesting – maybe. It is hard to write anything definitive given how quickly events are unfolding. Investors were taking turns being spooked by possible trade wars, cancelled (but now rescheduled) Korean denuclearization summits, and elevating unrest in the Middle East. The US market continues its volatile tug‐of‐war between heavy fiscal stimulus and tightening monetary policy. Interest rates and the US dollar finally started to act the way we’ve been expecting them to (rising and strengthening, respectively), causing a “risk off” run in many EM assets.

And then along came Italy. The populist and left‐leaning 5 Star party attempted to form a government with the nationalist, anti‐establishment, and right‐leaning League party (with both parties being anti‐Eurozone), only to see the Italian President Sergio Mattarella block that formation and reject the coalition’s choice for Economic Minister (Paolo Savona, who was viewed as being far too much of a Eurosceptic). Those two parties will now try to re‐form a workable coalition, or Italy will need to have new elections, and the concern is that populist and/or anti‐Eurozone activists will gain power. As Europe’s third largest economy (behind Germany and France), the thought of Italy leaving the Eurozone is simply intolerable to the markets, and they reacted violently.

To continue reading, download the full document below: