Last week saw a significant shift down in emerging market equities, losses in oil despite the OPEC deal to extend production cuts, and gains in bonds in Europe despite better growth views from the data, writes Bob Savage, CEO of Track Research over the weekend.

Last week was month-end and the start of the end for 2017. The week delivered a bit for everyone bullish and bearish particularly in the U.S. as the Senate passed its version of tax reform and as the FBI struck a deal with former National Security director Flynn to testify against Trump.

Impeachment risks rose from 0% to something even as the equity markets rallied – with the playbook of Watergate and Clinton proving that impeachments don’t make for easy bear trades on risk assets.

In the case of the present situation, many see the Trump problems as propelling Congress to act more aggressively to counter any backlash from voters in 2018.

This was also a rotational week where winners lost and losers won.

The last week saw a significant shift down in emerging market equities, losses in oil despite the OPEC agreement to extend production cuts, and gains in bonds in Europe despite better growth views from the data.

There was a lot of discussion about December and year-end – what are the themes that drive the rest of the year with the FOMC expected to hike December 13 but how their forecasts for 2018 seem matters – as does the Powell, Goodfriend new Fed.

The U.S. yield curve has nagged many bears into seeing a recession risk in late 2018/early 2019 but it’s not clear about the role of the rest of the world and their easy money.

The US dollar (USD/EUR) remains on the ropes despite a modest uptick last week and its role in financial conditions and bubbles also matters.

The explosion of bitcoin (BTC) and its closing at new highs Friday makes clear that bubble fears are ongoing.

China and its regulatory and deleveraging shift will be a focus in December as 10Y bonds dance near 4%, the shadow banking liquidity dries up and property prices remain the favorite barometer for trouble even as equities look nervous despite 4Q growth holding.

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The UK and Brexit discussions dominated last week and likely continues this week as the rally back in the British pound (GBP/EUR) and the better hopes for a “softer” deal drive. The issue there is in inflation and the BOE policy forecasts being off the mark.

The pain in Emerging Markets is clearly on the agenda for December as it has been a great run and we have seen clear worries that rates up in the U.S. mean trouble elsewhere.

Turkey and South Africa remain the key barometers for worry there.

Finally, there is the role of the ECB in December as the political noise from the lack of a clear German coalition, to the upcoming Catalan vote to the spring Italian vote all have some risks should they squeeze up rates too fast via their tapering and there talk.

The general point being – the next week isn’t going to be a holiday for any investor as the economic data from world drives reactions by central bankers that still seem to exert extreme control over the markets.

For now, views about U.S. politics and their effect on markets appear to be far overblown in comparison to the role of the FOMC and the yield curve or the ECB and its tapering.

What happened over the weekend isn’t likely to shift the focus much with:

--the US investigating ways to counter North Korea (looking for anti-missile sites in California)
--with China Xi promising not to close the door to the global internet
--with Greece and lenders reaching a deal on reforms ahead of the bailout review,
--with the EC preparing for a Brexit transition deal but UK May still suffering domestic political hits
--with Secretary of State Tillerson fighting the press for his job
--and with the Republicans fighting to get ahead of the Trump/Flynn imbroglio

Politics dominate the headlines even as global growth and policy rates determine the money flows.

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