August 18, 2017
Risk assets started the week on a positive note with North Korean tensions subsiding, however, volatility returned to the market on Thursday as terrorist attacks in Barcelona and dysfunction in Washington took center stage. Moreover, Trump’s response to the violence in Charlottesville caused outrage across the country and led to the dissolution of two advisory groups that were designed to give corporate leaders a direct line to President Trump. Matters only intensified when rumors spread that Gary Cohn, the National Economic Council Director and key player in pushing forward potential tax reform, had resigned. This rumor was quickly discredited, but it left investors questioning the probability of Trump being able to pull through with his pro-growth policies. Another headline that caught our attention this week was that Mario Draghi will not discuss tapering the ECB quanti-tative easing purchase plan at Jackson Hole later this month and will wait to address the topic in the fall. Draghi’s patience with regard to the tightening monetary policy fully aligns with our view that monetary policy normalization will evolve at an extremely slow pace and may slow further if political leadership cannot work together in a coordinated manner.
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