MFS Week in Review
A review of the week's top global economic and capital markets news.
A review of the week's top global economic and capital markets news.
For the week ending 26 April 2024
As of midday Friday, global equities were firmer on the week, though trading was choppy. Easing geopolitical concerns and generally upbeat earnings reports helped offset interest rate jitters. The yield on the U.S. 10-year Treasury note rose to 4.67% from 4.63% a week ago, though it traded as high as 4.735% on Thursday amid sticky inflation readings. The price of a barrel of West Texas Intermediate crude oil edged up to US$84 from US$83.10 a week ago. Volatility, as measured by the Cboe Volatility Index (VIX), fell to 15.4 from 18.7 last Friday.
MACRO NEWS
Sticky U.S. inflation pushes yields higher
U.S. 10-year Treasury yields traded as high as 4.735% on Thursday after the core PCE price index measure used to calculate Q1 GDP rose 3.7% quarter over quarter despite the economy expanding at a slower-than-expected 1.6% annual rate. Friday’s monthly core PCE measure, released along with personal income and spending data, rose 0.3% month over month and 2.8% year over year. While the GDP figures were lower than expected, consumer spending remained robust, with most of the drag on growth coming from elevated levels of imports and a build in inventories. In March, personal income rose 0.5% while personal spending grew 0.8%. Markets headed into Friday’s data fearful of another upside inflation surprise after Thursday’s data, so yields edged lower to around 4.67% as Friday’s numbers came in close to forecasts. However, January and February core PCE readings were revised up, making the path of future U.S. Federal Reserve rate cuts less certain. Markets currently anticipate one rate cut before year end, in November.
U.S. bans noncompete clauses for many
The U.S. Federal Trade Commission on Tuesday issued a rule that prohibits companies from enforcing existing noncompete agreements on anyone other than senior executives. The FTC says that noncompete clauses, which typically prevent workers from taking a new job or starting a business for a certain time period after leaving an employer, hamper competition for labour and result in lower pay and reduced benefits for workers. Businesses that use them say they are an effective way to protect their intellectual property, customer relationships and other investments. Several business groups immediately sued to block the ban in federal court.
DOL issues new fiduciary rule
The U.S. Department of Labor this week approved a rule that would extend the fiduciary requirements under the ERISA law to all advisers, brokers and insurance agents who provide advice on individual retirement accounts, including rollovers. The change begins going into effect on September 23 and the industry will then have a year to fully comply. Earlier efforts to impose a fiduciary rule have been struck down or narrowed by the courts.
QUICK HITS
EARNINGS NEWS
With about 45% of the constituents of the S&P 500 Index having reported for Q1 2024, blended earnings per share (which combines reported data with estimates for those that have yet to report) shows that earnings slightly rose around 3.3% compared with the same quarter a year ago, according to data from FactSet. Sales growth is up 4% year over year.
Past performance is no guarantee of future results.
Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research, CNBC.com.
This commentary was first published in the United States by MFS and is distributed in Canada by SLGI Asset Management Inc., with permission.
MFS Investment Management or MFS refers to MFS Investment Management Canada Limited and MFS Institutional Advisors, Inc. MFS Investment Management Canada Limited is the sub-advisor to the Sun Life MFS Funds; SLGI Asset Management Inc. is the registered portfolio manager. MFS Investment Management Canada Limited and MFS Institutional Advisors, Inc. have entered into a sub-advisory agreement.
The views expressed in this commentary are those of the authors and are subject to change at any time. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any mutual funds managed by SLGI Asset Management Inc. or sub-advised by MFS. These views are subject to change and are not to be considered as investment advice nor should they be considered a recommendation to buy or sell.
Information presented has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to its timeliness or accuracy. This commentary may contain forward-looking statements about the economy and/or markets; their future performance, strategies or prospects. Forward-looking statements are not guarantees of future performance, are speculative in nature and cannot be relied upon.