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:

As the new administration gets underway, President Trump has wasted no time in declaring his priorities. He is already calling for 4% annual growth (even though such a pace would deviate substantially from the past sixty years’ worth of economic cycles), beginning work on the wall with Mexico, paying for that wall with a 20% border tax, and approving the Keystone and Dakota pipelines. Unfortunately, his plans may demand a different economy than the one he inherited: 4Q growth disappointed analysts today, and his outlined plans look likely to increase the long-term deficit substantially. Though corporations look likely to benefit from his proposed deregulation and fiscal stimulus, execs have been reticent to embrace those expectations. That is to the chagrin of Larry Summers, who argues that their long-term loyalty to shareholders should necessitate opposition to some Trump policies. Also, a certain poorly-constructed equity index closed higher than a round number, which coincided with a decent week for risk assets.

Globally, trade has taken center-stage. Trump has already ordered the U.S. withdrawal from the Trans-Pacific Partnership, and China may step in to fill the trade leadership role that the TPP had been specifically designed to prevent. Chinese diplomats have also indicated that China is prepared to lead the global economy if the U.S. steps away from the role. Despite that intent, the Chinese yuan saw a major decline in usage as a trade currency last year on the back of dollar strength and capital controls. Finally, Prime Minister May’s plans for trade have puzzled experts by dint of their infeasibility.

Despite a legal hurdle for Brexit, the outlook for both the U.K. and the Eurozone looks brighter. The U.K economy had the strongest growth of G7 countries in Q4. The Eurozone also posted strong credit growth in December, and the ECB sees enough strength to start considering a wind-down of its bond-buying program.

What to Watch:


The Polly Portfolio Team