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Solaris Advisors Market Commentary July 2017

By Ralph Sinsheimer

31 July 2017

Over the past year, a number of factors restricting global growth reversed trend, leading to improved economic performance in most areas of the world and an ongoing rally in stock markets. First, the US dollar, which had strengthened by 27% from 2014 through 2016, softened by 6.4% in the first half of 2017, as a result of benign inflation data in the US and a more hawkish tone from global central bankers. A lower dollar eases profit pressure on US multinationals. Second, the precipitous fall in WTI crude oil prices - from over $100/bbl in 2014 to under $30/bbl in early 2016 - yielded to firmer prices. And although oil prices have declined this year they still have still been in the $40-55/bbl range. Healthier oil prices have relieved some concerns about the sustainability of many of the oil sector’s players and the disinflationary impact caused by cheap oil. Third, declining global manufacturing production in 2015, which was the result of excess inventory levels, turned around by the second half of 2016 as sales picked up and began outpacing inventories. Collectively, the improved direction of these factors has resulted in a hike in capital spending and sharp improvement in global corporate earnings.

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