Dear clients and friends,
At Perseus Wealth it is very important to us that you are well informed about what’s happening in the markets. Here is a brief recap of what has been going on over the last month or so and what we expect in the month ahead.
What’s happening now:
Improved trade negotiations ease market concerns while the Fed prepares for an additional rate cut.
- What’s going on? It appears that the US and China have reached a meaningful agreement on trade, with final details planned to arrive by November. The agreement states that China will buy a large sum of agriculture products such as soy and corn as well as open some previously closed economic gates to the US. In return, the US is putting its planned mid-October tariff increase on hold.
- Why is it important? The current White House administration is motivated to keep the US economic and stock market narrative optimistic heading into election season, and a trade resolution is their most potent tool to do so. While many issues have yet to be resolved between the two countries, the agreement signals that the Chinese are interested in negotiating a resolution before the 2020 election.
- What is the potential impact? Federal Reserve Chairman, Jerome Powell, stated that “trade policy seems to be playing a role in the global slowdown” while acknowledging that monetary policy can and should take that into consideration. Although the futures markets are anticipating an additional .25% rate cut in December, if trade progress continues into 2020 and economic data improves, the Fed may feel comfortable leaving rates alone while the data recovers.
The month ahead:
Since 1977, the Federal Reserve has operated under a triple threat dual mandate of seeking maximum employment, stable prices, and moderate long-term interest rates. Currently, labor markets are keeping their momentum as unemployment is at a generational low of 3.5%, prices in the aggregate are stable relative to wages and the Fed’s inflation target, and long-term interest rates are moving closer to their average since the two most recent rate cuts have occurred.
The bottom line:
The U.S. economy continues to be driven by a strong and productive workforce. Moving into Q4 and early 2020, accommodative interest rate policy from the Fed as well as trade progress could act as a tailwind. There does not appear to be any economic data that supports a near term recession.
As always, please call us with any questions.
John and Sean
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that any strategy will be successful.