Markets take a break from recent strong gains

Here's what we're thinking

January 25, 2017

Given sharp market swings over the past few months materialized amidst a severe spike in policy and geopolitical uncertainty, it came as no surprise to us that major indices have moved sideways since mid-December as investors try to digest the quickly evolving global backdrop. Year-to-date, North American equity markets and commodity indices are up approximately 1% while 10-year bond yields are just 4bp lower. The focus for markets in the near-term will clearly be fixated on the new U.S. administration’s policy measures which have already included executive orders to exit TPP trade talks, open NAFTA negotiations, defer portions of Obamacare, and impose a federal hiring freeze. Key for markets will be an agreement on a tax reform package that could include “border- adjustment”/import taxes and income tax cuts, as well as plans for a fiscal stimulus economic boost.

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