Market Recap – Spotlight On The Fed As Q2 Kicks Off

It was a choppy week with global equities falling early, only to jump on Wednesday following the stronger-than-expected ADP National Employment Report. However, gains were short-lived as the recent Fed minutes spooked investors, causing stocks to sell off in the latter hours of the trading day. Treasury yields were relatively flat, while the dollar gained further against the euro. Gold ended the week slightly higher.

Weekly Returns:
S&P 500: 2,356 (-0.3%)
FTSE All-World ex-US: (-0.5%)
US 10 Year Treasury Yield: 2.38% (-0.01%)
Gold: $1,255 (+0.4%)
USD/EUR: $1.060 (-0.5%)

Major Events:

Monday – Tesla surpassed Ford in market capitalization, making it the second largest U.S. automaker behind GM

Tuesday – Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, stepped down amidst involvement in a 2012 leak of confidential information

Wednesday – A report from ADP showed the U.S. private sector added a better-than-expected 263,000 jobs in the month of March

Wednesday – The Fed released its latest minutes, showing officials want to start reducing the central bank’s balance sheet later this year

Thursday – In a surprise attack, the U.S. launched close to 60 cruise missiles at an air base in Syria following reports of chemical weapons used by the Assad regime

Friday – After changing the rule on filibusters, the U.S. Senate confirmed Trump-nominated Neil Gorsuch to the Supreme Court

Our take:
The first quarter of 2017 is now at an end. It was an interesting period, with politics garnering most of the attention. International stocks led asset class returns, followed closely by gold and foreign real estate, while commodities lagged on weakness in energy. We’ll provide a more in-depth review in our quarterly market commentary, which will be released shortly.

But as we start Q2, a familiar face has already recaptured the spotlight: the Federal Reserve. On Wednesday, the Fed released its latest minutes, addressing a long-standing elephant in the room: the central bank’s inflated balance sheet. Officials agreed to start shrinking the $4.5 trillion portfolio later this year, but remained undecided on the pace of the reduction. The news surprised markets, sending stocks sharply lower in afternoon trading.