Is geopolitical news weighing more on markets?

In today’s edition of Market Week in Review, Consulting Director Todd LaFountaine interviewed Mark Eibel, director, client investment strategies, about the impact of recent U.S. geopolitical news on financial markets.

Equity markets taking stock of U.S. geopolitical headlines

Markets are starting to react a little differently to news from Washington, D.C., Eibel said, although not dramatically so. However, recent headlines have resulted in a little more downside movement—in contrast to markets continually going up. “While there’s been no strong reaction, markets are at least starting to listen,” Eibel remarked, noting that there’s particular sensitivity to conversations around potential tax reform in the U.S. In addition, Eibel said, markets are more likely to hone in on geopolitical news this time of year, given that second quarter earnings season is mostly wrapped up and there’s not a lot of other noteworthy financial news in late summer.

Economic policy symposium underway in U.S.

The focus shifted to the Jackson Hole, Wyoming, economic policy symposium, which began yesterday. Eibel does not expect any major news to come out of the three-day conference, which is being attended by central bankers, policymakers, academics and economists from across the globe. The symposium is not typically a venue for delivering major monetary or policy announcements, Eibel said, noting that former U.S. Federal Reserve Chairman Ben Bernanke did sometimes treat it this way. Because of that, there’s been some expectations that current central bank leaders will follow in his footsteps—but Eibel sees that as unlikely. “People should anticipate that the symposium is going back to what it was initially designed for: a great place to go in August, have a conference and swap white papers,” he quipped.

Manufacturing flourishes across Europe

Transitioning to the latest batch of economic data, Eibel stated that the numbers from Europe continue to present a rosy outlook. Manufacturing thrived across the region in August, with the IHS Markit Flash Eurozone Purchasing Managers' Index® rising to 55.8, bolstered in particular by Germany. This type of economic growth is very consistent with what Eibel and his team of strategists at Russell Investments have been expecting.

In the U.S., new numbers from the Commerce Department on durable goods orders were at first glance disappointing, Eibel said, as orders fell by 6.8% in July. However, a lot of this can be attributed to aircraft volatility. “Aircraft are big purchase items, and depending on whether or not you buy a couple more planes than the month before, the month-over-month numbers can shift dramatically,” he said. Eibel stressed that, overall, underlying economic data continues to point toward economic expansion in both the U.S. and Europe.

Watch the video.