Coverage Universe - Weekly Price Changes May 18-25, 2018
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Reprieve from Bond Market – Earnings
Fears of an escalating trade war on a global scale are encouraging capital to move for safety. Demand for government bonds and secure dividends is pushing prices higher and yields lower, marking another weak of declining interest rates. Lower interest rates, with very few exceptions are positive for markets. Share prices also depend on earnings as well as the general level of interest rates, and react to both.
Since trade wars are expected to be negative for earnings, this and the flight to safety are pushing the level of interest rates lower. Earnings growth could deteriorate from extra tariff costs tacked onto operating expenses. If a business can pass these costs along, this will attract the inflation hawks at central banks.
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