Housing Starts data released | Consumer Sentiment data released | Vice Chair Randal Quarles speaks on Bank Supervision at the American Bar Association Banking Law Committee
January 17, 2020
SIFMA SmartBrief
News on the capital markets
Morning Bell
S&P 500 boasts long climb with little volatility
The S&P 500 has risen 27% during the past 12 months, and it has delivered that gain by climbing steadily, rather than soaring. The index has risen or fallen less than 1% since mid-October, marking one of the longest periods without significant volatility.
The Wall Street Journal (tiered subscription model) (1/16) 
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Happening Today
Industry News
Stock prices relative to earnings growth at record high
The price-earnings to growth ratio, which gauges whether a stock is properly valued, is at the highest reading since Bank of America tracking began in 1986. Anything above 1 indicates overvaluation, and the ratio is at 1.8, meaning "the S&P 500 is running on fumes," BofA strategist Savita Subramanian says.
CNBC (1/16) 
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US retail sector posts steady holiday sales
US consumer spending continued to increase through the end of the holiday shopping season. Retail sales, including transactions in stores, online and in restaurants, rose a seasonally adjusted 0.3% in December compared with November, according to the Commerce Department.
The Wall Street Journal (tiered subscription model) (1/16) 
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Fixed income boosts Morgan Stanley Q4 profit
Morgan Stanley has reported record annual revenue of $41.4 billion and fourth-quarter earnings of $2.2 billion, beating analysts' expectations. The bank has raised performance targets after posting strong results across almost all businesses, with fixed-income trading revenue surging 125% year over year in Q4.
Reuters (1/16),  The Wall Street Journal (tiered subscription model) (1/16),  Financial News (UK) (subscription required) (1/16) 
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Washington Roundup
USMCA clears Senate
The Senate has approved the US-Mexico-Canada Agreement, replacing the 26-year-old North American Free Trade Agreement. The USMCA modernizes and rebalances the trade relationship with Canada and Mexico, promotes economic growth, creates jobs, and provides certainty for farmers, workers and manufacturers. SIFMA President and CEO Kenneth E. Bentsen, Jr. has applauded this passage and supports adoption, saying the "USMCA includes a robust financial services chapter and SIFMA welcomes its passage by the Senate."
Reuters (1/17),  National Public Radio (1/16) 
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"Lockup" for economic data to cut off computers
The Bureau of Labor Statistics is changing the "lockup" procedure for economic data to keep the information secure from algorithmic traders before public release, including removing computers, which can provide machine-readable news, from the Washington newsroom March 1. Commissioner William Beach says the change follows a 2014 recommendation from the Labor Department inspector general.
Reuters (1/16),  Financial Times (subscription required) (1/16),  The Wall Street Journal (tiered subscription model) (1/16) 
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Bentsen: US banks' access also helps Chinese markets
Access to Chinese markets given to US financial firms after the signing of a "phase one" trade deal is a boon to both sides, SIFMA President and CEO Kenneth E. Bentsen, Jr. says. "We think it will actually be beneficial not just to US firms wanting to do business in China but will be beneficial to the Chinese economy by further modernizing their capital-markets system, and that will enhance their banking system as well," Bentsen says.
National Public Radio (1/16) 
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Treasury to roll out 20-year bond
The Treasury Department will start selling a 20-year bond during the first half of this year. The product is being introduced to help with the budget deficit, which is expected to exceed $1 trillion this fiscal year and might continue at that level during the next 10 years.
The Associated Press (1/16) 
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Global Update
Climate, trade are top challenges facing WEF
The World Economic Forum convenes next week in Davos, Switzerland, as political leaders face challenges on climate change, foreign policy and trade. Former Finnish Prime Minister Alexander Stubb, who plans to attend, says the gathering must address the "new world disorder."
CNBC (1/17) 
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BoE, FCA set deadlines for Libor switch
The UK Financial Conduct Authority and the Bank of England have announced a series of deadlines for Libor phaseout. The first deadline is March 2, when users and issuers of derivatives should shift to the Sterling Overnight Index Average.
Pensions & Investments (free access for SmartBrief readers) (1/16),  Financial Times (subscription required) (1/16) 
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Chinese economic growth hits lowest level in 29 years
The Chinese economy expanded 6.1% last year, the slowest growth in 29 years but within the range of 6% to 6.5% targeted by the government, according to the National Bureau of Statistics. The government regularly enacted monetary stimulus and tax cuts to head off a long economic downturn.
South China Morning Post (Hong Kong) (1/17),  Nikkei Asian Review (Japan) (tiered subscription model) (1/17) 
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Asset Management Report
Green ETF from BlackRock gets investment flood
Investors are responding favorably to BlackRock's emphasis on green investing. The company's iShares ESG MSCI USA exchange-traded fund, which focuses on environmental, social and governance criteria, received $1.15 billion Wednesday, a record one-day inflow.
BNN Bloomberg (Canada) (1/16) 
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Operations Update
Quants face challenges as early hopes fall flat
Automated, quantitative strategies have failed to deliver on an early promise, with only 15% of quant mutual funds outperforming the US stock market in 2019, according to Nomura.
Financial Times (subscription required) (1/16) 
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Register at the Early Bird Rate: Ops 2020 -- Join us in San Diego on April 21-24
SIFMA's 47th annual Operations Conference & Exhibition will gather operations, technology and regulatory leaders from across the securities industry for three days of discussions, addressing the industry's most critical priorities. Connect with over 900 of your peers, representing the entire ecosystem of financial operations that powers performance in the capital markets. Topics will include Operational Resiliency, Consolidated Audit Trail, Reg BI, Data Management, AI, Cybersecurity and more. Early bird rates end Jan. 31.
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Discover the Latest in Economic Insights from SIFMA's 2019 End-Year US Economic Survey
SIFMA's twice-annual US Economic Survey compiles economic forecasts from SIFMA's Economic Advisory Roundtable members, analyzing what lies ahead for the economy, including GDP growth, unemployment rate, inflation rate, and interest rates. Learn why trade, global growth and US political shock are key risk factors in the 2020 forecast and more in this survey.
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D&I in Financial Services: A Deep Dive
Given the wholehearted acknowledgement that building and maintaining a diverse and inclusive workforce and industry is imperative, hear from financial services leaders on what specifically they're doing at their firms to achieve and measure progress in this area.
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Editor's Note
SmartBrief will not publish Monday
In observance of Martin Luther King Jr. Day in the US, SmartBrief will not publish Monday. Publication will resume Tuesday.
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You know there are moments such as these when time stands still and all you do is hold your breath and hope it will wait for you.
Dorothea Lange,
documentary photographer, photojournalist
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