The Week Ahead – The Beautiful Game

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

The World Cup has begun and if you were visiting Iceland over the weekend, you probably saw Iceland’s first-ever world cup match. It drew an amazing 99.6% viewership! As always, events like the World Cup and the Olympics remind me that the world continues to shrink with the help of technology. The 2018 World Cup is expected to break all-time global viewership records, with one research company forecasting total viewership of 3.4 billion for the entire event (reminder, global population: 7.6 billion). With eyes glued to “the beautiful game”, we could see less volatility in the markets for the duration of the World Cup (similar to what we saw with the Olympics), particularly in soccer-crazed countries like Italy, which has been in the headlines lately with Italexit. Sadly, the United States did not qualify for the World Cup this year, but has won the right to co-host, along with Canada and Mexico, the 2026 World Cup. Not a bad consolation prize. 

As was widely anticipated last week, the Fed hiked the federal funds target rate to 1.75% – 2.00%. What surprised markets was the FOMC pulling forward the dot plots to imply four total rate hikes in 2018 (an increase of one), three hikes for 2019 (no change), and only one hike in 2020 (previously two). Additionally, Fed Chair Powell announced a new change to FOMC communications regarding press conferences. Beginning January 2019, press conferences will now follow every FOMC meeting. After an initial move upward, U.S. Treasury yields have settled back close to pre-FOMC meeting levels. In what feels like Groundhog Day, President Trump announced Friday that the U.S. would go forward with tariffs on $50 billion of Chinese goods… which then, of course, was matched by China that same day, which imposed tariffs of $50 billion on U.S. beef, poultry, tobacco, and cars. One thing to keep an eye on is the appetite of U.S. Treasuries by foreign countries. Foreign countries currently hold $6.17 trillion of $14.84 trillion of Treasury debt outstanding through April. China is the largest owner of U.S. debt at $1.18 trillion. There are a lot of potential levers that could be pulled if we do see a full blown trade war. 

The week ahead will be quiet in terms of economic data releases. FOMC members will be speaking at various economic forums this week and investors will be largely focused on their language. In particular, both Fed Chair Powell and ECB President Draghi will be speaking at an event in Portugal on Wednesday.

Data deck for June 16 – June 22: