What are the top market drivers this quarter?
There are three big themes we are watching at the moment. First are the dovish statements from Janet Yellen and the Fed last week which pushed the markets up. This also canceled any notion that there would be a live Fed meeting in April where they would discuss raising interest rates. With the Fed being out of the news until their June meeting, there will be two other market drivers… oil and earnings.
Oil shows signs of decoupling from the market
While oil has been the driver of markets since last year, we are starting to see it decouple from the markets slightly. Oil is down 12% and so far the market has not followed. The market could catch up but if it doesn’t, this would be a sign of a more healthy environment.
Earnings as a market driver
Earnings where down 4.2% in the first quarter this year. This was the worst since 2009. However, the dollar has continued to weaken over the past six weeks. This is good for multi-national firms and it could really help their earnings give a push to the markets.
Business confidence is low
The IPO (Initial Public Offering) market is an indicator of business confidence. We saw the IPO market basically stop in the first quarter of this year. There were eight IPO deals in the first quarter that only totaled about $700 million which is a drop in the bucket in terms of what IPO’s normally do. This is the worst IPO start to a year since 2009. In comparison, last year’s first quarter saw $5.5 billion in IPO’s with 34 deals. You can see the confidence of businesses entering the market to raise capital is very slow.
What to expect in April
We saw a good Jobs Growth report last week. We believe this, along with what is going on in China, will cause the Fed to hold off raising rates in April but we will still be watching that closely. We are also focused on earnings season which begins April 11th.
We will continue to keep you updated.
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