It may be holiday season, however the Blackberry won’t be far from hand

 Janet Yellen appeared this week in front of Congress. Her testimony has given equity investors some reassurance that the Fed is not prepared to jeopardise economic growth by raising interest rates too quickly, with her dovish inflationary comments. Fridays retail sales and inflationary data appeared to underline Janet Yellen’s comments that the weakness in inflationary pressures may be less transitory than the Federal Reserve thought a few weeks ago. The Vix index, finished the week close to its historic lows, once again suggesting confidence or complacency in the outlook for equity investors. The developed markets of the US, Asia and Europe all gained ground last week. The price of gold rallied as one would expect as US Treasury yields fell. The oil price likewise saw Brent Crude rise close to $49 a barrel after 5 days of gains.

The earnings season started on Friday as JP Morgan, Wells Fargo and Citi all reported second quarter results. Despite reporting inline or better than anticipated earnings the bank’s sector traded weaker on Friday.  Part of the explanation for this may lie in the fact that investors had anticipated a good quarter and had baked in higher expectations, this along with the more dovish comments may suggest some earnings caution for the second half of the year. Buy on the rumour, sell on the fact as the old market saying goes. Several investment bank strategists have come out in the past few weeks expressing caution over equity valuations, ahead of the earnings season, for this very reason. The weekly AAII investor survey reporting only 28% of retail investors polled expect the US market to be higher in six months’ time. Well below the historical average suggesting retail remain cautious, however, a piece of Merrill Lynch research out this week suggest that retail investors equity allocation are above averages over the past ten years. This probably suggests private investors fundamentally remain cautious, however they see little alternative for saving.

This week David Davis and Michel Barnier start the second round of Brexit Negotiations. One is starting to get the feeling this whole process will drag, and that some sort of agreement within the two-year time frame is becoming more remote. On Tuesday, we get the latest inflation data for the UK economy. Expectations are for the rate to remain close to last month’s year on year rate of 2.9%. However, it would not be surprising to see it slip back after some weak consumer and wage growth data in the past weeks.

Earnings season gets into full swing this week with more banks in the US reporting, along with big tech heavy weights such as Microsoft. Alcoa report on Wednesday, after a strong performance year in the shares, investors will look to see how Alcoa see their outlook for the demand for aluminium in the months ahead as a window on growth. On Thursday the ECB meet, no change to interest rate policy is expected at this meeting, but once again Mario Draghi’s rhetoric for the outlook for monetary policy could impact capital markets.