Central Banks Soften –Earnings Improve, Updates: PPL, PKI, AW, VET, CGX
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The central banking community's stance on raising interest rates is softening. After four years of raising rates, in a few small one quarter point increments, central banks were talking about more. This has been the main reason for the decline in all the major stock indices since late January 2018.
The extent of the exhaustion is evident from the lack of recovery even after decent Q1-2018 earnings reports. This week's earnings updates cover 5 companies all of which have increased dividends and have favourable outlooks.
This new direction for central banks is not unexpected. Monetary policy was creating an outlook for steadily rising interest rates for a long period into the future. This is poison to valuations. Better alternatives were needed; this is the likely reason for the many new faces on the US Federal Reserve central banking committee since Trump arrived in the White House. Evidence of this change, its timeliness and the opportunity it provides are covered in this week's commentary.
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