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Recommendation Changes
T, ACR.UN, CUF.UN, BLX, EMA, more...

Central Banks in Transition- Updates: BIP, MRT, PPL, RPI, VET

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Change is in the wind for the leadership at the US Federal Reserve, where the current bias is to raise interest rates. This is understandable after 9 years of accommodative monetary policy needed to dig out from the Global Financial Crisis. This bias towards raising interest rates began in early 2014 and has been the reason for a steadily stronger US dollar, until recently. The US dollar finally stopped falling last week, gaining 0.2% compared to our basket of nine global currencies. Perhaps a sense of order is returning to the White House.

The US Central Bank committee's entire case for raising rates has been built on improving conditions in the US labour market where the pace of wage growth has not changed since 2010. Coming up on Thursday and Friday of this week is the PPI and CPI data for July-2017. A better than expected report is what Yellen and company want in order to justify the need for more rate increases along with a reduction in the holdings of US government debt accumulated since the Global Financial Crisis.

For three of the five names in this week's updates, AFFO per share improved by at least 10% this quarter compared to the same quarter last year, yet share prices have trended lower. These values are being impacted by the rising interest rate outlook. This week's economic comments identify the average wage gains since 2010 and inflation rates since the early 1980's. The US central bank is perhaps over estimating wage gains and inflation possibilities. According to history changes to both of these are becoming more muted. This is something that a possible new leadership at the US central bank could see much differently. A lot could be riding on this week's inflation data, given Yellen's pending reappointment as Chair in early 2018.

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