Global Market Snapshot - March 2018

Key Market/Economic Observations

United States

Market Volatility Finally Returns as Investors Closely Eye Interest Rates and Inflation

We believe the increase in volatility was largely driven by a shift in market psychology. Investors realized that interest rates and inflation would not remain low forever. Markets should ultimately be able to digest higher interest rates and inflation expectations. In addition, we think the current speed of yield movements should not be extrapolated too far into the future.


Yields Rising with Increased Volatility in Equities

Like in the United States, volatility spiked over the past month. The European spike appears to be a response to U.S. market volatility rather than any underlying assumption changes. Economic growth momentum remains solid and relative valuations indicate better long-term return potential, in our view.


The Inflation Comment Heard ’Round the World

We think investors continue to misinterpret both the Bank of Japan’s (BOJ’s) intent to slow its monetary stimulus programs and Japanese inflation expectations. The December readings for inflation were well below the BOJ’s 2% inflation target. Therefore, we believe monetary policy will remain more supportive than some market participants seem to be anticipating.

Emerging Markets

Healthy Economic Data in China Confirm Currency Strength

The last time the yuan was this strong relative to the dollar (August 2015), the People’s Bank of China (PBOC) caught markets off guard by significantly depreciating the currency. We do not view this as a risk today, as the PBOC has maintained language that its monetary policy is “prudent and neutral.”


Oil Prices Rise Slowly; Energy Sector Leads S&P 500® Earnings

PNC Economics forecasts oil prices should hover around $60 per barrel for the remainder of the year. This should be supportive of continued Energy sector earnings growth, although sector performance continues to lag.

Strategy Views

Thinking About the Implications of Fiscal Stimulus at this Stage in the Business Cycle

We think the short-term impact of fiscal stimulus (tax cuts and deficit spending) will be positive. However, we must consider what this means for inflation, interest rates, and the earnings multiple investors are willing to pay for stocks past 2018.

For more information, please contact your PNC Advisor or call 888-762-7226 to request an appointment with a PNC Wealth Management Professional.

Amanda E. Agati, CFA®

Jeffrey D. Mills

Co-Chief Investment Strategists

For more information, please contact your PNC Advisor or call 888-762-7226 to request an appointment with a PNC Wealth Management Professional.

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