In addition to rounding up the week’s important issues in the financial markets, we’ve also added brief thoughts on what effects on wealth and investment management you should watch for, which we’ll continue to highlight each week.

Market Action:

Markets rallied strongly to record highs on expectations of supportive policy and on sound underlying U.S. economic fundamentals. On the policy side of things, markets see the Trump administration as being exceptionally business-friendly and pushing through a massive wave of deregulation. On the economic front, U.S. jobless claims fell even as U.S. manufacturing workers have been leaving their jobs, which economists do not expect to return, and consumers have been borrowing more in line with higher confidence. One of the only concerns has to do with the price of success: the strong U.S. dollar limits U.S. firms’ export opportunities while benefiting European competitors.

Conversely, the rest of the world needs all the help it can get. At the same time that the European Central Bank has decided to scale back its quantitative easing program, Italy’s politics have descended into turmoil. The government asked the ECB for more time to resolve the failing Monte dei Paschi di Siena, but the ECB’s refusal likely means an Italian state bailout and depositor bail-in. China also faces increased capital flight and has seen more scrutiny of its two trillion dollars of bad bank loans. More holistically, almost three quarters of CEOs and CFOs foresee a riskier business environment globally going forward as compared to previous years.

What to Watch:

Pugnaciously,

The Polly Portfolio Team