Weekly Economic Report
It was an eventful week, to say the least. First, the manufacturing ISM data came in weaker than expected pretty much all around the world – except China. Then, the Federal Reserve cut rates 25 basis points as widely expected – but with two dissents for tighter monetary policy. Moreover, Chairman Powell’s press conference underwhelmed the Street, as he did not say that he was on a path to further cuts. Nevertheless, we are priced for a near certainty there will be a cut in September and more beyond. President Trump was so incensed that he lashed out at Powell for having failed us. Friday morning, we learned that payroll employment was roughly in line with expectations, but due to downward revisions in earlier months and weak hours worked, the report reinforced the Street’s appetite for rate cuts. But the big bomb was President Trump’s announcement of a new round of 10% tariffs on $300 billion of previously untaxed Chinese exports to the US, starting September 1. Markets liked that even less than the Fed’s footdragging. Equity markets retreated, but fixed income asset values plunged, taking ten year notes down to 1.85%.