US Equities Rebound for the First Time in 2016



Global concerns

The US equities market (SPY) rose by 1.4% for the week ended January 22, 2016, mainly due to macroeconomic factors. Global equities have rebounded for the first time in 2016, as the Chinese government has vowed for more regulation and Europe has set its eyes on more easing in its March meeting.

Oil prices (USO) rebounded steeply on short coverings by hedge funds. European (EFA) and emerging market (EEM) equities rose during the week ended January 22.

In the United States, new applications for unemployment benefits rose to 293,000 in the week ended January 16, 2016, mainly due to the slowing US economy. The four-week moving average rose to 285,000, the highest number since April 2015.

Manufacturing activity remained weak due to a strong dollar and a weaker global economy. The Federal Reserve is expected to raise interest rates at a slower pace, mainly due to the risk of the global economy diving into a recessionary mode.

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Bank of Canada

Investors and economists expected the Bank of Canada to cut interest rates or signal further rate cuts in response to falling oil prices and slowing major economies. The bank, however, decided to keep rates steady and wait for for the newly elected Liberal government to unveil its first budget this spring. The Canadian dollar has been on a falling spree, resulting in expensive imports. This has also influenced the Bank’s decision to hold rates steady.

Stock market performance is a key driver of asset managers’ revenues, as the way the market performs flows directly into earnings and share prices. Major asset managers such as State Street, BlackRock (BLK), Franklin Resources (BEN), Morgan Stanley, T. Rowe Price Group (TROW), and Berkshire Hathaway (BRK-B) are directly affected by the performances of US equities.


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