Political tensions ran high on both sides of the Atlantic without progress on ending the US government shutdown or approval of a Brexit deal. As the President and House Speaker Pelosi fired alternating political blows, Britain’s Parliament overwhelmingly rejected Prime Minister May’s Brexit plan. While May survived a subsequent no-confidence vote, she is struggling to negotiate a viable trading plan prior the March 29 exit from the EU. In better news, there seemed to be warming in the trade rift between the US and China as China may agree to boost its US imports and negotiations continue at the end of the month.
Stocks shrugged off the political impasse and built upon the gains of the prior week – choosing to focus on more dovish comments from Fed Open Market Committee members, earnings, and trade progress with China. With not even three full weeks into the year, US large cap stocks increased by almost 7% and small caps are up nearly 10%. Global stocks also rallied with riskier emerging market stocks rising almost 7% year-to-date. Bond yields rose last week providing a headwind for bond prices offset by less concern about corporate credit risk. Commodity and publicly traded real estate also joined in the 2019 rally – up over 6% year-to-date.