Daily Commentary BY THE CURVE TEAM –

Markets Finish the Year Mixed

2nd of January, 2018

It was a mixed end to the year for most markets. While the past year saw some significant moves across a number of those markets, the year ahead could prove a little more volatile.

It was an interesting finish to the year for most markets. After a very solid performance over the course of the year, equity markets finished the year with a whimper, pointing to a weak start to the local market today.

Currency markets followed the recent trend with USD weakness the dominate theme. While the Fed has largely been on its own for most of the year in tightening monetary policy, it seems expectations that others will soon follow that is keeping the USD under pressure.

Interest rates were the most interesting and are the key to watch over the year ahead. After breaking through a multi-decade downtrend just before Christmas, 10 year yields pulled back going into the close of the year. Also of note, the 2 year yield has now risen above the S&P dividend yield for the first time in over a decade.

Interest rate markets in terms of both cash rates and longer term bond rates, could be the key to how a number of markets behave over the coming year.

David Flanagan

Director - Interest Rate Markets