First Western Trust’s investment management team shares their insight into the highlights and low points in the domestic and global markets this week:
Equity markets finished the week lower with the S&P 500 recording only its second negative week since the start of 2013. Cypress dominated the headlines as the small Mediterranean nation sought a European bailout to rescue its beleaguered banking industry. On Sunday, a deal was reached providing €10B of emergency loans, preventing Cyprus from defaulting and possibly having to leave the Euro Zone.
Under the terms of the deal, “insured” deposits of €100,000 or less will not be impacted. Deposits over €100,000 will be subject to a tax of as much as 40% though the exact amount remains to be determined. The tax is primarily seen as affecting wealthy Russian companies and corporations which have used Cyprus as a tax shelter for years. Additionally, Cyprus’s second largest bank will be unwound.
Domestically, Congress reached a deal to fund the government through the end of the cur-rent fiscal year, avoiding the possibility of a government shutdown at the end of March. Separately, the Senate produced its first budget in four years. While the House and Senate budgets represent opposite ends of the political spectrum, the very fact that both houses produced budgets provides negotiators the opportunity to reach a bi-partisan compromise on government spending.